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QUEST MEANS BUSINESS

Manufacturing Slows in China; Japan's Export Slump; Asia's Slowdown; US Market Wobbles; Wal-Mart Stops Selling Kindle; European Markets Sliding; Indian Shopkeeper Protests; India Open for Business; Pound, Euro Down; Marikana Miners Return to Work; South African Finance Minister Confident of Country's Mining Future

Aired September 20, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


NINA DOS SANTOS, HOST: Falling exports and vacant factories. China and Japan suffer because of weakness in Europe.

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DOS SANTOS: Iron fury in India. Thousands protest plans to let foreign supermarkets set up shop.

And South Africa's finance minister tells me that the country's miners should share the benefits of this profitable industry.

Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.

Good evening. Tonight, signs of weakness in Asia's two largest economies are hitting stock markets right around the world. On every continent, stock markets are currently in the red as data shows that things are getting quite a bit worse and not much better at the moment.

We start in the world's second-largest economy, which is China. Factory output there has been falling, according to HSBC's latest gauge of manufacturing activity. In fact, the bank's initial reading of its PMI or Purchasing Managers' Index is 47.8 for the month of September.

Let's just put this into context for you. Anything below the mark of 50 shows a decline. What this means is that manufacturing activity for China has now been shrinking for 11 straight months. HSBC's chief economist for China says that the recent stimulus measures put on the table should lead to a turnaround for China in the fourth quarter of the year.

Well, in Japan, the world's third-largest economy, exports also fell, this time by 5.8 percent in August, compared to the same month a year ago. That's the third straight month of declines for this country.

And in fact, if we break down these numbers, what I want to show you is that the sharpest fall in exports actually was to the European Union. Those exports to that region down around about 23 percent for the period.

Now, Europe's demand for Japanese cars, it seems, has been dropping. This time, it dropped by more than a third as, of course, the European economy remains on shaky ground. Japan's exports to its biggest trading partner, which is China, actually fell by -- look at that -- nearly 10 percent.

It's also worth nothing that these figures are just for the month of August, which means that they don't include the effects of China's calls for a boycott on Japanese products. All of that came after the recent escalation of a dispute over the ownership of a set of islands in the East China Sea, so things could get worse from here on, some say.

Exports to the United States, though, were something of a bright spot here, up by more than 10 percent. And that increase is mainly down to higher shipments not of cars, but of -- this time of car parts.

Well, Bob Parker is senior advisor for Credit Suisse. He told me earlier today that we won't see any improvement in China's economy at least until its leadership transition is complete.

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BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: You've got to make a very clear distinction between the economy which has slowed down, which is China, and for the third quarter of this year, Chinese growth may come out at less than 7 percent annualized.

DOS SANTOS: And that was their kind of important number, wasn't it?

PARKER: Well, that's a very important number.

DOS SANTOS: First it was 8 percent, then it was 7 percent. But now they could have to get comfortable with 6 percent.

PARKER: I don't think they'd be comfortable with 6 percent at all, which is why, as we work our way through the establishment of the new leadership in China, and it now looks as though that will finally be clarified in late October or, worst, in early November.

I think one very significant development in markets is going to be further easing of monetary policy by China and also a very significant easing of fiscal policy. Because Chinese policy is obviously very dissatisfied with 7 percent growth, and they would be extremely dissatisfied with your suggestion of it decelerating further towards 6 percent.

So, post this political change in China, the objective will be to get growth, as we go into early 2013, back towards 8 percent, and that can only be achieved by a major easing in policy.

DOS SANTOS: And this is obviously an enormous irony, isn't it? Because this same Obama administration maybe three, four years ago -- three years ago at least -- we desperately trying to get China to weaken its currency.

PARKER: Well, the currency now has been stabilized, and I think the Chinese authorities quite rightly are now following a policy of strangling the currency so, in a range roughly sort of plus or minus 2 to 3 percent around current levels against the US dollar.

DOS SANTOS: If you bring up, for instance, the Asian market, it's particularly pronounced here on the Shanghai composite. This market hitting a four-year low --

PARKER: Correct.

DOS SANTOS: -- in today's session. What can we expect from China to try and diversify itself away from those major export economies, like Europe, like the United States --

PARKER: Yes.

DOS SANTOS: -- but on shaky ground, and stimulate the domestic consumer.

PARKER: In fact, this year, China is one of the few equity markets worldwide where we have a negative year-to-date return. Now, if I'm right and they ease monetary and fiscal policy later in the year, I think you will see a turnaround in the Chinese economy and the markets probably in late November, December, going into early 2013.

DOS SANTOS: Of course Japan, currently in embroiled in a sovereignty dispute over islands --

PARKER: Correct.

DOS SANTOS: -- with China at the moment, and that country very much suffering because of the strength of its currency.

PARKER: Correct.

DOS SANTOS: These are two major manufacturers in the world, second and third largest economies. If they're having trouble, what does it mean?

PARKER: The yen is not that overvalued against the US dollar. But it is significantly overvalued against the Chinese renminbi and the Korean won, and there is very clearly a Japanese loss of market share relative to China and Korea.

I think a final factor, which is another reason for expecting low Japanese growth is, of course, Japanese companies are not investing in Japan, they are investing a lot in Southeast Asia in those lower-cost, rapidly-growing economies such as Thailand and Indonesia.

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DOS SANTOS: Now, Wall Street is also feeling the gloom at the moment. The Dow Jones industrial average has actually been stuck in the red for most of the session, as you can see, recouping some of its earlier losses, but still down around about 5 points or four hundredths of one percent.

Alison Kosik joins us now, live from the New York Stock Exchange to run us through the day's actions. So, Alison, I suppose markets are caught between a rock and a hard place. Jobs figures in the Untied States that weren't quite as optimistic as some might have hoped and disappointing manufacturing numbers from China.

ALISON KOSIK, CNN CORRESPONDENT: Exactly. And it is exactly that story that is putting pressure on stocks today. There's worries about a global manufacturing slowdown and a slowdown in global demand. That is really what's weighing on the market today.

And it began with those weak reports out of China and Europe, but the US got into the act after the opening bell itself, because the Federal Reserve of Philadelphia reported virtually flat business activity in a region that touches three US states, and this follows four months in a row of contraction.

The Philly Fed says firms reported continuing declines in shipments and employment. And the outlook for the next six months, it's improved, but we're not going to see that improvement until the early part of next year.

And then, you mentioned those jobless claims. That's also weighing on stocks today. Those jobless claims fell -- 3,000 to 382,000, and they are still reflecting an effect from Tropical Storm Isaac. Thousands of those new claims were associated with businesses closed temporarily because of the storm.

But the thing is, Nina, even if you discount those 8,000, that number of claims, the level at 382,000, is just very high right now. It really doesn't show much improvement in the labor market. Nina?

DOS SANTOS: OK, so that's it for the broader economic picture, but if we turn towards corporate news, there's a story that's just broken in the last few minutes that you're following here. We've been hearing that Wal- Mart has now decided to stop selling the Kindle e-reader. What is all this about?

KOSIK: Exactly. So, Wal-Mart had decided to join the discount rival Target in stopping the sale of Amazon Kindles. Now, there's no specific reason that's been given for this change, though it appears to be a pricing dispute at the moment. No comment yet from Amazon on the change, either.

Now, like Target, Wal-Mart sees Amazon as a competitor. Wal-Mart is trying to grow its internet sales, so it's taken the Kindle out of its customers hands. That -- they're thinking that could help Wal-Mart compete better with Amazon in the online space.

Now, Kindles are still offered at several brick and mortar chains, including Best Buy and Radio Shack, two firms that have struggled recently, in part because Amazon often beats them on price. So, it's really going to be interesting, Nina, to see if they're going to follow Wal-Mart and if they're going to follow Target and give Amazon and the brick and mortar boot.

DOS SANTOS: Now, you mentioned the world brick and mortar. I want to come back to the concept of BRICs, which includes China, these sort of so- called fast-growing economies in the world. And if China, which is now the second-largest economy in the world, isn't growing as much as people would have thought, presumably that must have traders worried where you are.

KOSIK: It does, because you know why? We are all interconnected. China is one of our biggest trading partners and if things are slowing down in China, it means that we're not going to be having that trading relationship in a strong way. And obviously, that's -- that's weighing on markets.

When you look at stocks, itself, the stock market, it's a forward- looking indicator. And as we get these reports of a slowdown of manufacturing in China, the worry is when you look at the view going forward that things are going to be slow, to say the least. Nina?

DOS SANTOS: Alison Kosik, thanks so much for breaking that down for us this evening. Alison Kosik there, live at the New York Stock Exchange.

Well, speaking of these BRIC economies, the feel-bad factor from Asia's latest set of economic figures, it seems, has spread to every continent. It just goes to show, it's funny, isn't it, that we're talking about decoupling a couple of years ago, and obviously these markets are well and truly very interconnected.

So, as you can see, these European markets ending the day a number of hours ago firmly in the red, largely on the back of the disappointing figures coming out of China. But also, we saw European manufacturing figures that came in worse than expected after already a couple of disappointing reports on the construction side of Europe just a couple of weeks ago.

After the break, a nation of furious shopkeepers.

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DOS SANTOS: Why Indian traders are trying to slam the door shut on Wal-Mart and Tesco.

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DOS SANTOS: It's been a difficult day on the markets in India, and that's largely because the government wants to bring foreign supermarkets to this country. Today, the country's shopkeepers showed just how much they're opposed to these kinds of plans.

Demonstrators set fire to effigies, slowed down markets, and even stopped trains doing a one-day strike. Traders say that their business will be destroyed if foreign giants are allowed into this lucrative market. Sanima Uda (ph) has more.

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SANIMA UDA (ph), CNN INTERNATIONAL CORRESPONDENT (voice-over): Indian traders up in arms. They say the country has sold out to Western corporate pressures after the government announced it would allow foreign supermarkets, like Wal-Mart and Tesco, to sell directly to India consumers.

PRAVEEN KHANDELWAL, CONFEDERATION OF ALL INDIA TRADERS (through translator): If these companies come here, it would be impossible for small traders to compete. There are 700 million people who do these small jobs in India, so the real threat is to this country's manual laborers, the small traders, farmers, the poor, who earn less than 20 rupees a day.

UDA: Protestors marched through the streets of Delhi, urging retailers to obey the nationwide call to strike.

On a normal working day, these busy streets account for more than 90 percent of India's retail sector, and nearly 15 percent of the country's GDP.

Kori (ph) and Sons has been selling everything from rice to soap for the past 70 years.

MULCHAND GUPTA, SHOP OWNER: This is my grandfather.

UDA: It's a family-run business. A third generation proprietor, Mulchand Gupta, is worried about the future.

GUPTA (through translator): An ant will never survive in front of an elephant. One Wal-Mart comes, there's no way small shops will be able to survive.

UDA: Muhammad Gautam has been coming to this store for the past 20 years. He says no big supermarket will be able to match the services he gets here.

MUHAMMAD UMAR GAUTAM, SHOPPER: Sometimes, if I don't have money, I don't need to think about any -- I have to rush to my home to bring money. They provide very kind service.

UDA: Analysts say as long as small traders offer this kind of service, they don't have to worry.

ANKUR BISEN, ASSOCIATE VICE PRESIDENT, TECHNOPAK: The market in India is big enough. It's about $500 billion market. And this market presents opportunities both for organized retail as well as mom and pop stores to coexist.

UDA: The government says foreign retailers will help improve the supply chain of products from farm to shelf and create new jobs. But many here simply aren't buying it.

KHANDELWAL (through translator): If multinational superstores are really so good for the economy, then why is America's economy in such a bad shape? If that could happen there, then what magic wand does India have so that when the multinationals come here, everything will change for the better?

UDA: Small traders and various political parties are ramping up the pressure, hoping lawmakers take notice.

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DOS SANTOS: Well, the president of Wal-Mart's Indian arm has defended the government's plans to welcome it to India. In a statement, Raj Jain said, quote, "This policy change will allow us to connect directly with the consumer and to save them money. But being stores of the community, we'll also help them to live better. We hope to make a positive impact on the lives of the people of India," he said.

Richard Heald is the CEO of the UK India Business Council. He says that India needs to prove it's open for business. Earlier today, he explained to me that the vision behind India's reforms is much bigger than a couple of big-name supermarkets.

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RICHARD HEALD, CEO, UK INDIA BUSINESS COUNCIL: Ultimately, this is about attracting foreign investment, technology, commercial know-how to build the infrastructure necessary to improve the supply chain.

Forty to fifty percent of all food rots between the farm and the consumer in India. And if you look at the farmer, he gets a bad deal, as well, from the existing supply chain. A World Bank study indicates that a farmer in the fields in India gets the lowest percentage of the final retail price of any country in the world.

Now, that is what needs to be improved, and India needs to get foreign capital and foreign expertise to do that, and that is what these reforms are about.

DOS SANTOS: If we go back to the retail sector, a lot of people would be saying, it's worth about $500 billion, surely it's big enough for both foreign and local providers.

HEALD: I think it is. I think absolutely, I totally agree. And that's one of the reasons why all this disturbance on the streets that we're seeing at the present moment is somewhat misplaced.

You have been -- you've lived in India. You know that there are two forms of models, one of which is the international stores or, indeed, even the organized retail, be it Reliance or be it Nature's Basket, the Goodrich company.

Now, the ordinary man in the street doesn't use those facilities, and he won't use those facilities even with liberalization. He will still use the old mom and pop stores, the 20 million or so shopkeepers. That will not change.

And therefore, saying that Wal-Mart or Tesco is going to come riding over the hill and change everything is, I think, a fundamental misconception.

DOS SANTOS: But the reality is is that India doesn't really have a choice here. It's used to at least a good couple of percentage growth points than it has at the moment. It's used to GDP growing in the order of about 8 percent, it's now down to 6 percent.

Credit rating agencies could downgrade its debts, that could set India off into a bit of a spiral with more expensive interest payments. It doesn't really have the choice here. It needs to internationalize.

HEALD: I think it needs to internationalize, but not necessarily for the reasons that you've indicated. India at the present moment is about a $1.7 trillion economy. It's projected to be $30 billion -- $30 trillion in the year 2030.

In order to capture that growth and translate that into a benefit for its citizens, it needs to develop, it needs to grow, it needs to have investment in its infrastructure. It needs to spend $1 trillion on infrastructure and roads over the next few years.

It doesn't have the capacity to do that itself, and therefore, it has to show that it is open for business, in terms of international investment coming in.

And that's why, taken as a whole, the measures that we saw on Friday, is the start of what I would call, characterize a rehabilitation in terms of people's perceptions as to the momentum of this government.

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DOS SANTOS: That's the head of the UK India Business Council speaking to me earlier today.

Time now for a Currency Conundrum for you out there. And staying with the Indian theme, the symbol for the Indian rupee was only introduced two years ago. My question today is, how has that design actually chosen?

Was it A, but commission for a popular artist? Was it B, by a national contest? Or could it have been C, by a referendum? We'll have the answer for you later on the show.

Speaking of currencies, sterling and the euro are both down against he US dollar in today's trading session. New numbers show that business activity in the eurozone has been sliding at the fastest pace in more than three years. And that, of course, as you'd imagine, has been putting pressure on the euro versus the US dollar. At the moment, when it comes to the Japanese yen, $1 will buy just over 78.

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DOS SANTOS: Thousands of South African miners clocked into work today, putting an end to six weeks of industrial action at Marikana. Workers accepted a pay increase of between 11 and 22 percent.

The deadlock might have been broken, but it doesn't necessarily mean that trouble is at an end here. CNN's Nkepile Mabuse is there.

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NKEPILE MABUSE, CNN INTERNATIONAL CORRESPONDENT: It may be the end of the six-week-long strike at Lonmin Platinum Mine here in Marikana, but trouble is far from over in South Africa's platinum belt.

On Wednesday morning, police tell us that they had to disperse a crowd of around 500 people armed with machetes and traditional weapons. They have gathered illegally, police say, outside the world's largest platinum producer, Anglo Plat. You will remember that last week, Anglo Plat had to suspend operations because unrest had spread to its mines.

Back here in Marikana, reaction has been mixed to that wage deal that was signed on Tuesday evening. Some miners very pleased to be going back to work and earning some money again, because in the past few weeks that they've stayed away from work, they haven't earned a cent.

UNIDENTIFIED MALE: Yes, I'm happy about -- no, no. Because the solution is coming, now. Yes, I'm happy solution.

UNIDENTIFIED MALE: In the case where we have something, we forfeit that thing. At least half is better than nothing.

MABUSE: Other miners feel that they were forced to sign this deal because of the crackdown has intensified by police.

Last week Saturday, 500 police officers went into this Marikana area, raided homes, confiscated weapons, and then started disbursing crowds using rubber bullets and teargas. Many of the miners saying that they're feeling under siege and they feel they're not even safe in their own homes.

The question that's being asked here in South Africa is who's the big winner at the end of all of this, and that's a question that I posed to the acting CEO of Lonmin.

SIMON SCOTT, CEO, LONMIN: There are no winners here. Forty-five people have lost their lives, so it's been tragic circumstances. The only way that anybody comes out of this as winners is going forward.

MABUSE: Some have criticized Lonmin for creating a dangerous precedent, saying this could become the norm, that violence would then follow these inflated wage increases. But Lonmin says it was the only way forward after quite a traumatic six weeks of this very violent labor dispute.

Nkepile Mabuse, CNN, Marikana, South Africa.

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DOS SANTOS: South Africa's own finance minister is confident that the future of mining in South Africa is sound despite the recent unrest. However, Pravin Gordhan still admitted to me that big investors aren't quite so sure.

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PRAVIN GORDHAN, SOUTH AFRICAN FINANCE MINISTER (via telephone): From the interactions that we've had with various types of investors, portfolio investors, FDI investors, and so on, it's understandable that they would be concerned after the kind of events that we've had here in a very small part in the overall mining industry.

DOS SANTOS: Have they expressed those concerns to you.

GORDHAN: But secondly, they need to be reassured -- sorry, Nina. They need to be reassured that, as the president has indicated, the government has brought the situation under control, we've insured that all of the key role players have been sitting around the table, and that the stability will be restored to the sector, in some cases already, and in other cases in the near future.

DOS SANTOS: Presumably, though, they have expressed these concerns to you.

GORDHAN: Yes.

DOS SANTOS: Have you had a situation where you've been sitting around the table with the bosses of very big international mining companies, and they've said, we're very concerned about how this is going to play out in the future and we could be revising our investment plans? Have you had that conversation with the CEOs of any major mining companies?

GORDHAN: I've actually personally had those conversations with most of the key companies in South Africa. None of them have said that they're pulling out, none of them have said that their concerns about the recent events are fundamental to their investment decisions.

And of course, as you know, the mines have generally around the globe have taken a dip. But generally, world demand has resulted in lower investment in anticipation of the fact that that situation in Europe and elsewhere is not resolving itself in the near future.

DOS SANTOS: Are there any winners and losers from the situation here? Will this end up leading to, let's say, South African mine workers getting much better terms and conditions further down the line, something that perhaps some might say would have been needed anyway?

GORDHAN: I think it's important that workers in mines and workers in other enterprises get a fair share of the benefits of their hard works, just as much as shareholders and managers need to get their share as well.

And around the world today, you have -- this is a key concern. How do the larger proportion of people who contribute to an enterprise get a fairer share of the good results that one has in an enterprise?

So, as long as there's a fine balance between what workers get out of the mining process and what others get out of it, as well, and government and employers are willing to work together with the unions to ensure that there are proper living conditions, there is proper skilling of the workers, and that we're preparing them for a better future, I think that this process will have been a very positive one in terms of the mining industry going into the future.

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DOS SANTOS: As Spain's economy struggles, Catalonia wants control of its own budget. The region's president took his concerns right to the top today. We'll tell you what Mariano Rajoy's response was to those demands.

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DOS SANTOS: Well, welcome back. I'm Nina dos Santos. These are the main news headlines this hour.

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DOS SANTOS (voice-over): Libyan officials have been offering their condolences in Tripoli for the victims of last week's U.S. consulate attack. Members of the U.S. government flew in for the special memorial service honoring Ambassador Chris Stevens and three other Americans that were killed in that attack in Benghazi.

A small but raucous protest shook the embassy district in Pakistan's capital, Islamabad, on Thursday. Anti-Western protesters threw rocks and lit fires. Police responded with tear gas and warning shots. Many Muslims are angry over French cartoons depicting Muslims and an anti-Muslim film that was made in the United States.

Well, black smoke rises from a fuel station in northeastern Syria. Syrian opposition groups say that regime airstrike hit the station, killing at least 55 people. Many more were wounded. Activists expect the death toll to rise from here on.

Hundreds of American boaters are expected to turn out on Thursday night for a special event focusing on the upcoming presidential election. But the event is not actually being held in America. Instead, it's being held in Spain. An organization called Rock the Vote is hoping to attract young ex-pat Americans to a Madrid discotheque to educate them about the election and also register their vote.

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DOS SANTOS: One of Spain's most influential regions has failed in its appeal for more economic independence from Madrid. Now the president of Catalonia, as you can see here, this gentleman in the lighter suit, (inaudible), met with the Spanish prime minister, Mariano Rajoy, here in dark blue, earlier on Thursday.

He was hoping to agree to a fiscal pact for Catalonia, giving it more freedom to run its budget. But it doesn't look as though he got quite what he was bargaining for. In his own words, he said, quote, "The meeting didn't really go very well."

Well, let's have a look at what Catalonia's own problems are, because it's got plenty of them. Starting out with some pretty big debt, debt that stands at more than $50 billion here.

If you take a look at that in context, in context with the other regions across Spain, as you can see, Catalonia's own debt (inaudible) is actually twice as big as any other region in Spain, even bigger than Valencia over there to its south.

Now Catalonia's already asked the Spanish government for about $6.5 billion in terms of loans. It's also struggling to meet this year's deficit target. That was a deficit target of around about 1.5 percent of GDP.

And what I also want to show you is that that, in turn, has led to this region's own credit rating being downgraded to junk status by Standard and Poor's. They took that action just last month.

In fact, Spain has raised more than $6 billion in a debt auction just today, borrowing at much, much lower rates than it had to in the previous month.

Now investors are warning Spain's prime minister, though, not to take the successful bond sale so far as a sign that the problems for this country are by any means over. Earlier I addressed this topic with Bob Parker, the senior adviser at Credit Suisse and I asked him how worried he was about Spain's own reluctance to ask for that badly needed bailout.

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BOB PARKER, SR. ADVISER, CREDIT SUISSE: Spain has obviously some major issues. Number one, the regions are struggling dealing with their deficit and debt problems. And we've had a number of Spanish regions now asking Madrid for bailouts.

I think the second problem is obviously the restructuring of the savings bank system. There is still a lot of work to be done. And in response to that, you know, Spain now has this 100 billion bailout to deal with recapitalizing the savings banks.

DOS SANTOS: They're calling it a credit line.

PARKER: Well --

DOS SANTOS: -- (inaudible) bailouts (inaudible).

PARKER: Let's talk English. It's a bailout. And you know, the money is there to recapitalize the banks, which they need.

The third problem is obviously the macroeconomic problem with high unemployment, the loss of tax revenue and that loss of tax revenue in a period of severe recession means that it's much more of a struggle to reduce your budget deficits.

And I think the bottom line is that Europe, quite rightly, is putting quite a bit of pressure on Spain, saying you need a bailout, and actually if you get the bailout with the ECB coming in under its new program, to purchase Spanish bonds, drive Spanish bond deals down, that will really alleviate the problem Spain has, which is its access to financing and access to financing at a reasonable price.

DOS SANTOS: Aren't we caught in something of a catch-22 here, because now that the ECB has said that they -- has said that they will take action --

PARKER: Yes --

DOS SANTOS: -- well, Spain is seeing a little bit of a spike in the bond markets and perhaps might be (inaudible) the situation of thinking we don't need to ask for a bailout yet --

PARKER: Well, that's --

DOS SANTOS: -- (inaudible).

PARKER: -- well, that's why at the moment we have a capital market standoff, because the Spanish government is saying, well, look, our bond yields are coming down. Therefore, we don't need a bailout.

The European Union is saying, look, bond deals are coming down because of the announcements of the program that has been basically introduced by the European Central Bank. So you, in a way, have a cat and mouse game here between the markets, the ECB, the European Union and the Spanish government.

And you know, something's got to give. Spain has quite heavy financing requirements over the balance of this year. There is very significant pressure from the E.U. on Spain to go the bailout route. Yes, I accept, it is politically difficult for the Spanish government to accept a bailout, and it would make the Spanish government probably even more unpopular than it is at the moment.

But I think something has to give and what will give inevitably in my forecast is that Spain will have a sovereign bailout in October or November.

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DOS SANTOS: CNN has spent the whole year looking for the most inspiring people in the world, and we call them the CNN Heroes. After the break, we reveal the top 10.

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DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum." Here's the question: How did India choose the symbol for the Indian rupee? And the answer to this is B. It was thanks to a national contest. The Indian government invited its citizens to submit their designs. The winning symbol was designed actually by an (inaudible) student.

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DOS SANTOS: It's time now to recognize the people who really make a difference to our world. Already this year we've profiled dozens of unheralded heroes, nominated by you, our global audience. And now we reveal and honor the top picks in the running for Hero of the Year.

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ANDERSON COOPER, CNN HOST: I'm Anderson Cooper. All year we've been introducing you to everyday people who are changing the world. We call them CNN Heroes. Well, now we announce the top 10 CNN Heroes for 2012.

The honorees are in random order.

Connie Siskowski is helping children who are caring for ill or aging loved ones to stay in school and hold on to their childhood.

Pushpa Basnet saves innocent children from growing up behind bars with their incarcerated parents.

Thulani Madondo organizes his Kliptown community to educate hundreds of their next generation.

Mary Cortani enlists man's best friend to give fellow veterans a way to move beyond PTSD and into life again.

Malya Villard-Appolon has turned personal trauma into a fight for justice for thousands of rape survivors in Haiti.

After using sports to fight his own addiction, Scott Strode now helps former addicts to stay fit and sober.

Wanda Butts brings water safety and swimming lessons to those most vulnerable, black and Latino children.

Catalina Escobar ensures healthy deliveries and solid futures for Colombian teens already facing motherhood.

Leo McCarthy's tragic loss of his daughter sparked his mission to end the culture of underage drinking.

And where terrorists stop at nothing to keep girls from being educated, Razia Jan fearlessly opens her school each and every day.

Congratulations to the top 10 CNN Heroes of 2012. Tell us who inspires you the most. Go to CNNheroes.com online or on your mobile device to vote for the CNN Hero of the Year.

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DOS SANTOS: Well, 10 nominees will be honored live on CNN on December the 2nd.

Let's turn now our attention towards the weather picture, Jenny Harrison is standing by to give us the full picture at the CNN International Weather Center, and Jenny, I gather we start with Europe. We seem to be looking pretty good of late.

JENNY HARRISON, CNN METEOROLOGIST: Yes, you know, you've had some lovely weather, haven't you? But that can't last, Nina, you know it can't last. The high pressure that's been responsible for the sunny skies and the pretty good temperatures is still out there, but it's actually been (inaudible) you can see in the last few hours.

Look at all that cloud that's been spinning across into the northwest. And of course bringing with it some rain, some heavy (inaudible) rain, some thunderstorms across northern areas of England into southern Scotland across Northern Ireland as well.

But it's still pretty good across much of western and certainly central Europe. That is where that high pressure is heading across and towards and in fact, eventually, it'll push down into the central Med.

So it is about time you had some better weather there again, but those showers are going to spread across much of Europe as we go through the first part of the weekend. They're going to be fairly widespread and scattered, though, but you will see what I mean.

There goes the front and it just squeezed across those central areas and of course, we could see a few more of those thunderstorms although it doesn't look as though we're going to see anything in the way of snow across the mountain tops.

But it is getting cooler. In fact, (inaudible) sunshine you need to head to the south across the western Med, in particular, some very nice air in place, warm air. So good temperatures. Meanwhile, to the north, particularly Scandinavia, those temperatures actually a little bit below average, 12 is your best in Stockholm on Friday.

Meanwhile 24 in Rome and still very warm in Madrid with a high of 31. Now temperatures in the U.S., still pretty warm across most of the country, apart from the far north. This front that's been coming through bringing with it another shot of cold air, (inaudible) the nighttime hours.

The early morning's frost has actually been reported and then we've got high pressure still across much of the east, the south as we go through Friday. Remember, shuttle Endeavour is on its journey, eventually on it towards LAX in California on Friday and good sunny skies there for the rest of Thursday and Friday.

But right now, just about two hours east of it, where we are here at CNN Center, Atlanta, Georgia, we have still got a fair amount of cloud out there. It's sort of been dispersed a little bit with the sunshine. It's trying desperately to break through, but there's some very low-level cloud.

But of course, I'm talking about the Gulf, if I haven't said, what is going on two hours east of Atlanta. But Friday, it's sunny skies and it should be pretty much the same on Saturday and Sunday. There goes all that rain, just a few showers across the Great Lakes. Might see some snow there.

Meanwhile, good temperatures across the south. There's that 29 in Atlanta on Friday. They make so much money in that Gulf, Nina, and they get to do it in sunny skies. It's just not fair.

DOS SANTOS: It's not. It certainly is a very different picture from Scotland, isn't it.

HARRISON: (Inaudible).

DOS SANTOS: Jenny Harrison, Jenny Harrison, thanks so much for that.

And that's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos. MARKETPLACE EUROPE continues on CNN.

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RICHARD QUEST, CNN HOST: This is MARKETPLACE EUROPE. I'm Richard Quest. It now seems likely the Eurozone crisis will rumble on into the autumn. Economic growth remains weak. Manufacturing output is contracting and businesses everywhere are looking for new, stable markets, even if that means moving just next door.

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QUEST (voice-over): Coming up, the Italian companies who've decided it's time to move over the border into Switzerland. And staying with all things Swiss, how the maker of the original Swiss Army knife has sharpened its brand.

Our passion, of course, is the little red knife and it was our challenge to find people who have the passion we had for this little red knife, for fashion (ph), for travel gear, for timekeeping (ph).

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QUEST: When it comes to the world's safe havens, it doesn't get much safer than Switzerland. A strong, stable democracy backed by a reliable currency. As the Eurozone crisis intensifies, it's not surprising that more companies from neighboring countries are looking to set up shop across the border. Nina dos Santos now reports from the Swiss border town of Lugarno.

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DOS SANTOS (voice-over): Across Italy's border lies the Swiss canton of Ticino. The region has much in common with its southern neighbor. The people there speak the same language and the Alpine scenery is equally spectacular. Yet when it comes to the business environment, the two places couldn't be further apart.

Switzerland has been attracting Italian firms for years, thanks to its favorable tax regime and what (inaudible) sidelined bureaucracy. Set up at the height of the 2009 credit crunch, Swiss Valor Advisory is a consultancy which helps firms to make the move.

GIANLUCA MARANO, CEO, SWISS VALOR ADVISORY (through translator): Firms were already moving to Ticino before the credit crunch, certainly before 2008. But in the last two years, there's been a huge increase. The sovereign debt crisis was one of the critical moments for companies in Italy. That was when the Italian banks stopped giving credit.

DOS SANTOS (voice-over): According to KPMG, the corporate tax rate in Italy is 31.4 percent compared with just 21 percent in Switzerland. But access to financing in international markets are also key. Habitare Group is an engineering and interior design company from Varese (ph) in northern Italy. With annual sales of 300 million euros and 450 employees, it's now looking to expand abroad.

FAUSTO BOGA, CO-CEO, HABITARE GROUP (through translator): Switzerland is a world center. We've decided to have our headquarters here to deal with our business around the world. Another advantage in Switzerland is they act fast. They're reliable and serious. The low taxes here generate work. We can employ more people so the unemployment rate here is really low.

DOS SANTOS: In the heart of Ticino lies the lakeside city of Lugano, a world-known banking hub just an hour and a half's drive from Milan.

DOS SANTOS: Since the onset of the Eurozone crisis, the sun has been shining on places like Lugano as companies seek to minimize their costs and maximize productivity. But that isn't to say it's all (inaudible).

DOS SANTOS (voice-over): Startup costs and the recent strength of the Swiss franc put pressure on margins.

GIORGIO GIUDICI, MAYOR OF LUGANO (through translator): (Inaudible) that there is a Swiss currency. We have the Swiss franc, not the euro, is an interesting point. Switzerland must find a balance between the euro and franc. But the fact that businesses keep moving here means it's worthwhile.

DOS SANTOS (voice-over): So for Italian businesses looking beyond their troubled home market, Ticino continues to be the choice destination, even if it's only a few miles away.

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QUEST: Coming up after the break, we stay with the Swiss. How the company that brought us the Swiss Army knife is now branching out into all sorts of brands.

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QUEST: When it comes to Swiss products, it doesn't get much more Swiss than this, the Swiss Army knife, made by a company that for more than a century manufactured one type of product designed for a niche market. That company is Victorinox. And today, stands as a case study for doing business in difficult and vulnerable times.

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QUEST (voice-over): Founded in 1884, Victorinox is still an independent family business. Today, 90 percent of its shares are owned by the company's foundation. Victorinox employs 1,800 people and produces 120,000 Swiss Army pocket and kitchen knives every day.

In total, it all brings in $528 million. The famous cross and shield emblem can now be found on everything, from watches to cutlery, clothing, luggage and fragrances.

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CARL ELSENER, CEO, VICTORINOX: All companies are in a difficult time right now, because of the financial crisis. But (inaudible) the Swiss companies have to deal with a very strong Swiss (inaudible), which makes our products less competitive in the global environment.

QUEST: And since the Swiss government is not about to use its foreign exchange policy for your benefit alone, what can you do? You either have to eat the margin or what can you do?

ELSENER: Our margin is now less smaller. And on the other side, we need to be more innovative. We are forced to be more innovative that our competitors in the rest of the world. We need and we try to be closer to our customers.

Victorinox does this with opening of our own retail stores on one side, and on the other side, opening our own distribution centers in the growing markets like China, Brazil, Mexico.

QUEST: You must have been relieved to say the least when the Swiss national bank had said it was going to hold the rate 120.

ELSENER: Yes. It was a big relief for most Swiss companies who depend on exportation and when you read the newspapers you can see if the bank would not have (inaudible) their exchange rate would be close to 1:1, which for many companies, would be a disaster.

QUEST: Now tell me, what on earth does any of this have to do with a company and a Swiss Army knife, particularly a pair of socks?

ELSENER: Yes?

QUEST: I mean, what are -- what are you doing, getting into the sock business?

ELSENER: OK. Then you look at all these different products, you will find out that they have one thing in common: they all are a companion of our customers. You carry the pocketknife in your pocket. The timepiece is on your tent (ph). The fragrance even on your --

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QUEST: Oh, come on. That's -- you -- any, any product, consumer product, could arguably say the same thing. But they don't suddenly start making bags (ph).

ELSENER: Yes, yes. Yes. But when you see all the products, they really have things in common. They are a companion for our customers and they all are inspired by the value and the heritage of this little red knife.

And our development team of the other product categories I always, when they are in designing room, I always put the Swiss Army knife in the middle of the table, and ask them really to study the functionality, the quality, the innovation, the design and work hard to really transform these values to the other products.

QUEST: The family decision to base to transfer the ownership of the company into a foundation, to hand it over, was there any dispute amongst the younger generation, those who basically said, oy, that's my birthright you're giving away.

ELSENER: Our family has always really completed the company with our own property, but as an something that has been entrusted to us. Our family does not think in quarters. We think in generations.

And our strategy has always been to build (inaudible) in good times so it's easier to invest in challenging times right now. And the goal of the foundation is to try to keep Victorinox in the long term finally independent and to make sure that during an inheritance, the company is not finally weakened.

QUEST: You are a Swiss company and a Swiss chief executive that doesn't like banks.

ELSENER: When I was a young boy, my father gave me the book of Henry Ford, the first, that Henry Ford recommended that you should never depend on loaned money, because the banks, they give you the umbrella when the sun is shining, but when it starts to rain, they take it away.

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QUEST: The chief executive of Victorinox, Carl Elsener, bringing to a close another cutting edition of MARKETPLACE EUROPE. Next week, we will be finding our way around the European business scene with the (inaudible) maker Tomtom. Until then, that's MARKETPLACE EUROPE. I'm Richard Quest. Whatever market you're in, I hope it's profitable. And I'll see you next week.

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