Feb. 12 (Bloomberg) -- South Africa’s government has the “space to cushion the economy” if a slowdown in economic growth persists, said Kuben Naidoo, head of the National Treasury’s budget office.
“We have a lot of room if growth is low for a longer time,” Naidoo told lawmakers in Cape Town today. “We will continue with a counter cyclical fiscal policy, however long it takes for the economy to recover.”
Finance Minister Trevor Manuel yesterday cut his economic growth forecast for this year to 1.2 percent, the lowest since 1998 and down from 3 percent estimated in October. Falling corporate profits and a slump in consumer spending will cut tax revenue, pushing the budget deficit to 3.8 percent of gross domestic product in the year through March 2010 from an estimated 1 percent this year.
The government doesn’t want the ratio of debt to GDP to “deteriorate too rapidly,” Naidoo said. If the government needs to run a wider deficit and raise borrowing, it plans to return to “safer” levels of debt once the economy recovers, he added.
South Africa’s debt will rise to 26 percent of GDP in the year through March 2010, from about 23 percent in the current fiscal year, according to the Treasury’s Budget Review published yesterday. It will reach 27 percent in the 2011 fiscal year, the Treasury forecast.
Thursday, February 12, 2009
LSE Set to Appoint Rolet Today as New Chief Executive, FT Says
Feb. 13 (Bloomberg) -- London Stock Exchange Group Plc will today appoint Xavier Rolet as chief executive officer, replacing Clara Furse, the Financial Times reported, without attribution.
Rolet has experience in dealing with exchanges and ran trading operations at Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Dresdner Kleinwort, the FT said.
LSE spokesman, Alastair Fairbrother, declined to comment, when contacted by Bloomberg News.
Rolet has experience in dealing with exchanges and ran trading operations at Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Dresdner Kleinwort, the FT said.
LSE spokesman, Alastair Fairbrother, declined to comment, when contacted by Bloomberg News.
Asian Stocks Rise on U.S. Mortgage Aid, Higher Retail Sales
Feb. 13 (Bloomberg) -- Asian stocks rose, led by banks and consumer companies, on speculation the U.S. will provide relief for homeowners and after retail sales in the world’s biggest economy unexpectedly increased.
Australia & New Zealand Banking Group Ltd., Australia’s third largest, jumped 7.1 percent in Sydney as the country’s senate passed a $28 billion stimulus package. Hitachi Ltd. added 3.1 percent as the company and its partners were named the preferred group to win a U.K. train contract. Rio Tinto Ltd., the world’s No. 3 mining company, fell 3.9 percent on concern the sale of assets to Aluminum Corp. of China will hurt profits.
“Reports that the U.S. is coming out with a support package for the housing market demonstrates the government’s drive to bring about an economic recovery,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “The market is headed for a rebound if policies are effective.”
The MSCI Asia Pacific Index advanced 0.8 percent to 81.82 at 11:07 a.m. in Tokyo, snapping a four-day, 2.7 percent drop. The gauge has lost 8.9 percent this year, extending 2008’s record 43 percent, as the credit crisis dragged the world’s biggest economies into recession.
The Nikkei 225 Stock Average rose 1.5 percent to 7,818.96 at in Tokyo. Australia’s S&P/ASX 200 Index rose 0.8 percent. All benchmark indexes in the region advanced except South Korea’s.
Futures on the Standard & Poor’s 500 Index fell 0.3 percent. The index staged a late rally in New York yesterday, erasing a 3.1 percent loss to gain 0.2 percent as news of the housing plan emerged.
Mortgage Aid
The Obama administration’s housing plan will use government money to help reduce interest rates for struggling borrowers, while asking lawmakers to approve more ways to modify mortgages, according to a person briefed on the proposal. U.S. Treasury Secretary Timothy Geithner intends to announce the plan in coming days, the person said.
“The outlook for a dose of relief for U.S. homeowners helped markets there stage a rebound, while economic data was fairly positive as well,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages $53 billion, said in an interview with Bloomberg Television. “The market here has been beaten down recently and is due for a bounce.”
Governments around the world are stepping up efforts to revive global growth that the International Monetary Fund predicted two weeks ago will grind almost to a halt this year. The number of Americans collecting jobless benefits reached the highest on record, though sales at U.S. retailers unexpectedly climbed in January, halting a six-month slide, government reports showed yesterday.
Stimulus Package
Australia & New Zealand Banking Group jumped 7.1 percent to A$12.73 in Sydney. Macquarie Group Ltd., Australia’s largest investment bank, added 3 percent to A$24.10.
The country’s Senate approved in a second vote a A$42 billion ($28 billion) stimulus package aimed at ensuring the economy doesn’t enter its first recession in 18 years.
Hitachi, which plans to build a manufacturing site in the U.K., rose 3.1 percent to 268 yen in Tokyo. The U.K. Department for Transport today named Agility Trains, a group that includes Hitachi, as the preferred bidder for a 7.5 billion-pound ($10.7 billion) contract to build and maintain a fleet of Super Express trains, replacing existing stock.
Pioneer Corp. tumbled 20 percent to 142 yen in Tokyo. The company said yesterday it will fire 10,000 workers and close its television operations as losses this year are expected to climb to 130 billion yen ($1.44 billion).
‘Don’t Like This Deal’
More than 100,000 job cuts have been announced by listed Japanese companies in the past six months as the global recession has pummeled Japan’s capital goods and export-oriented manufacturers.
Rio Tinto fell 3.9 percent to A$49.98. The stock also fell in London trading yesterday after Aluminum Corp., known as Chinalco, agreed to invest $19.5 billion by buying convertible bonds and stakes in projects in China, the U.S. and Australia.
“We don’t like this deal and don’t think it is the best option,” analysts at Goldman Sachs JBWere Pty Ltd. wrote in a report dated yesterday. “We think Rio is at a strategic and marketing disadvantage versus its peers going forward.”
Australia & New Zealand Banking Group Ltd., Australia’s third largest, jumped 7.1 percent in Sydney as the country’s senate passed a $28 billion stimulus package. Hitachi Ltd. added 3.1 percent as the company and its partners were named the preferred group to win a U.K. train contract. Rio Tinto Ltd., the world’s No. 3 mining company, fell 3.9 percent on concern the sale of assets to Aluminum Corp. of China will hurt profits.
“Reports that the U.S. is coming out with a support package for the housing market demonstrates the government’s drive to bring about an economic recovery,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “The market is headed for a rebound if policies are effective.”
The MSCI Asia Pacific Index advanced 0.8 percent to 81.82 at 11:07 a.m. in Tokyo, snapping a four-day, 2.7 percent drop. The gauge has lost 8.9 percent this year, extending 2008’s record 43 percent, as the credit crisis dragged the world’s biggest economies into recession.
The Nikkei 225 Stock Average rose 1.5 percent to 7,818.96 at in Tokyo. Australia’s S&P/ASX 200 Index rose 0.8 percent. All benchmark indexes in the region advanced except South Korea’s.
Futures on the Standard & Poor’s 500 Index fell 0.3 percent. The index staged a late rally in New York yesterday, erasing a 3.1 percent loss to gain 0.2 percent as news of the housing plan emerged.
Mortgage Aid
The Obama administration’s housing plan will use government money to help reduce interest rates for struggling borrowers, while asking lawmakers to approve more ways to modify mortgages, according to a person briefed on the proposal. U.S. Treasury Secretary Timothy Geithner intends to announce the plan in coming days, the person said.
“The outlook for a dose of relief for U.S. homeowners helped markets there stage a rebound, while economic data was fairly positive as well,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages $53 billion, said in an interview with Bloomberg Television. “The market here has been beaten down recently and is due for a bounce.”
Governments around the world are stepping up efforts to revive global growth that the International Monetary Fund predicted two weeks ago will grind almost to a halt this year. The number of Americans collecting jobless benefits reached the highest on record, though sales at U.S. retailers unexpectedly climbed in January, halting a six-month slide, government reports showed yesterday.
Stimulus Package
Australia & New Zealand Banking Group jumped 7.1 percent to A$12.73 in Sydney. Macquarie Group Ltd., Australia’s largest investment bank, added 3 percent to A$24.10.
The country’s Senate approved in a second vote a A$42 billion ($28 billion) stimulus package aimed at ensuring the economy doesn’t enter its first recession in 18 years.
Hitachi, which plans to build a manufacturing site in the U.K., rose 3.1 percent to 268 yen in Tokyo. The U.K. Department for Transport today named Agility Trains, a group that includes Hitachi, as the preferred bidder for a 7.5 billion-pound ($10.7 billion) contract to build and maintain a fleet of Super Express trains, replacing existing stock.
Pioneer Corp. tumbled 20 percent to 142 yen in Tokyo. The company said yesterday it will fire 10,000 workers and close its television operations as losses this year are expected to climb to 130 billion yen ($1.44 billion).
‘Don’t Like This Deal’
More than 100,000 job cuts have been announced by listed Japanese companies in the past six months as the global recession has pummeled Japan’s capital goods and export-oriented manufacturers.
Rio Tinto fell 3.9 percent to A$49.98. The stock also fell in London trading yesterday after Aluminum Corp., known as Chinalco, agreed to invest $19.5 billion by buying convertible bonds and stakes in projects in China, the U.S. and Australia.
“We don’t like this deal and don’t think it is the best option,” analysts at Goldman Sachs JBWere Pty Ltd. wrote in a report dated yesterday. “We think Rio is at a strategic and marketing disadvantage versus its peers going forward.”
BAE Systems Seeks Indian Partners to Build Military Vessels
Feb. 12 (Bloomberg) -- BAE Systems Plc, Europe’s biggest defense company, is in talks with Indian shipbuilders as it seeks to win contracts for surveillance vessels as the country beefs up coastal security after terror attacks in Mumbai.
BAE has held discussions with India’s state-owned shipyards and private builders to explore opportunities, said Julian Scopes, president of the London-based company’s Indian unit, in an interview. BAE can offer designs and technologies, or build warships with partners, Scopes said in Bangalore yesterday.
India’s government has pledged to boost surveillance at sea after terrorists infiltrated the financial capital in boats in November and killed 164 people. BAE’s push to win naval work comes as India seeks to reduce its reliance on Russia as its main military supplier.
“The Indians would like to broaden out their supply base,” said Steven Zaloga, a senior analyst at Teal Group, a Fairfax, Virginia-based consultant. “India has a fairly active domestic shipbuilding program, but when they have bought overseas, they tend to buy from the Russians.”
At least 10 terrorists arrived in Mumbai on an inflatable dinghy after hijacking an Indian fishing boat off the west coast and killing its crew, Home Minister Palaniappan Chidambaram said. They attacked the main railway station, two five-star hotels, a Jewish center and a hospital with automatic rifles, grenades and explosives.
Vulnerability
The attacks highlighted the vulnerability of India’s coastline, and the government will create a coastal command for overall supervision of maritime and coastal security, Chidambaram told parliament Dec. 11.
“They can take one of our designs and build them in India or we may have a joint design center,” Scopes said. “It’s for building ships more efficiently and effectively and cheaper.”
Separately, India and Russia haven’t agreed on conditions over the sale of the Russian aircraft carrier Gorshkov due to differences regarding costs. The Indian Navy agreed to buy the Gorshkov for $1.5 billion five years ago.
Under the terms of the agreement, Russia was to overhaul the 44,500-metric ton carrier and supply 28 MiG-29K fighter jets and other components. It subsequently raised the asking price by $1.2 billion, saying refit costs had increased.
“They had a certain amount of difficulty with the Russians and I am sure that is why BAE is speaking with them,” Zaloga added.
Russia has been India’s principal supplier of fighter planes and equipment in the past. Lockheed Martin Corp. and Boeing Co., the largest U.S. military contractors, made their first military sales to India only within the past 12 months.
Armored Vehicle
Scopes said BAE plans to make its joint venture with Mahindra & Mahindra Ltd., India’s biggest sport-utility vehicle maker, a base for exporting armored vehicles in Asia.
BAE will hold 26 percent of the venture and Mumbai-based Mahindra & Mahindra will own 74 percent. The partnership will build a version of BAE’s RG-31 mine-protected vehicle in India.
The RG-31 is an all-steel, welded-armor vehicle designed to protect occupants from explosions by antitank mines. The joint venture will have headquarters in New Delhi with an initial workforce of 50 to 60 people, and operations are scheduled to start in the second quarter of 2009, BAE said.
BAE has held discussions with India’s state-owned shipyards and private builders to explore opportunities, said Julian Scopes, president of the London-based company’s Indian unit, in an interview. BAE can offer designs and technologies, or build warships with partners, Scopes said in Bangalore yesterday.
India’s government has pledged to boost surveillance at sea after terrorists infiltrated the financial capital in boats in November and killed 164 people. BAE’s push to win naval work comes as India seeks to reduce its reliance on Russia as its main military supplier.
“The Indians would like to broaden out their supply base,” said Steven Zaloga, a senior analyst at Teal Group, a Fairfax, Virginia-based consultant. “India has a fairly active domestic shipbuilding program, but when they have bought overseas, they tend to buy from the Russians.”
At least 10 terrorists arrived in Mumbai on an inflatable dinghy after hijacking an Indian fishing boat off the west coast and killing its crew, Home Minister Palaniappan Chidambaram said. They attacked the main railway station, two five-star hotels, a Jewish center and a hospital with automatic rifles, grenades and explosives.
Vulnerability
The attacks highlighted the vulnerability of India’s coastline, and the government will create a coastal command for overall supervision of maritime and coastal security, Chidambaram told parliament Dec. 11.
“They can take one of our designs and build them in India or we may have a joint design center,” Scopes said. “It’s for building ships more efficiently and effectively and cheaper.”
Separately, India and Russia haven’t agreed on conditions over the sale of the Russian aircraft carrier Gorshkov due to differences regarding costs. The Indian Navy agreed to buy the Gorshkov for $1.5 billion five years ago.
Under the terms of the agreement, Russia was to overhaul the 44,500-metric ton carrier and supply 28 MiG-29K fighter jets and other components. It subsequently raised the asking price by $1.2 billion, saying refit costs had increased.
“They had a certain amount of difficulty with the Russians and I am sure that is why BAE is speaking with them,” Zaloga added.
Russia has been India’s principal supplier of fighter planes and equipment in the past. Lockheed Martin Corp. and Boeing Co., the largest U.S. military contractors, made their first military sales to India only within the past 12 months.
Armored Vehicle
Scopes said BAE plans to make its joint venture with Mahindra & Mahindra Ltd., India’s biggest sport-utility vehicle maker, a base for exporting armored vehicles in Asia.
BAE will hold 26 percent of the venture and Mumbai-based Mahindra & Mahindra will own 74 percent. The partnership will build a version of BAE’s RG-31 mine-protected vehicle in India.
The RG-31 is an all-steel, welded-armor vehicle designed to protect occupants from explosions by antitank mines. The joint venture will have headquarters in New Delhi with an initial workforce of 50 to 60 people, and operations are scheduled to start in the second quarter of 2009, BAE said.
Wednesday, February 11, 2009
Research In Motion Falls as Profit Margins Narrow
Feb. 11 (Bloomberg) -- Research In Motion Ltd. fell the most in almost five months on the Nasdaq after saying profit will come in at the low end of its targets, signaling the BlackBerry maker sacrificed margins to gain customers.
Gross margin, or the percentage of sales left after production costs, also will be at the lower end, Research In Motion said today. The results suggest the latest models, such as the Storm and the Bold, have won fewer customers than some of the older BlackBerrys, according to analysts.
“There was a lot of hope that the Bold and Storm would be blockbuster products,” said Scott Pope, a Chicago-based analyst with First Analysis Corp. “Customers may not be responding as well as expected to the newer products.”
Subscriber gains will be 20 percent higher than the 2.9 million forecast in December, Research In Motion said. The company introduced more consumer-friendly models to compete with Apple Inc.’s iPhone 3G, vying for a dwindling pool of spending as the economic slump intensifies. Consumer spending in the U.S. fell in December for a record sixth consecutive month, capping the worst year since 1961.
“They cannot grow in the way they’ve been growing if they just focus on the enterprise,” said Anil Doradla, an analyst with William Blair & Co. in Chicago. “The only issue and challenge is the minute you get into the consumer space, some of the business models are changing.”
The stock fell $8.28, or 15 percent, to $48.76 at 4 p.m. New York time in Nasdaq Stock Market trading, the biggest decline since Sept. 26. Research In Motion has dropped 48 percent in the past year.
Storm Deals
The company introduced the touch-screen Storm in November in the U.S. exclusively through Verizon Wireless. The two began a “buy-one-get-one-free” sale last week as the recession deepens into the worst financial crisis in at least 25 years. Amazon.com Inc., the world’s largest online retailer, now sells the Storm for $99.99 with a service plan, according to its Web site.
Waterloo, Ontario-based Research In Motion had projected fourth-quarter profit of at least 83 cents a share, compared with the 86-cent average of estimates compiled by Bloomberg. The company said in December that margins narrowed as new phones, such as the BlackBerry Storm, made up for a larger percentage of sales.
So-called smart phones such as the Storm are capable of surfing the Web and downloading video at high speeds. Apple, based in Cupertino, California, debuted the latest model of the iPhone in July. Palm Inc. also plans to introduce a new model, the Pre, in the first half of the year.
The new devices will heighten competition for Research In Motion as the pool of new subscribers in the U.S. shrinks, with more than 80 percent of people already carrying a mobile phone.
Smart Phones
The smart-phone market overall will grow next year even as sales of other devices drop, research firm IDC said in December. The market will expand 8.9 percent worldwide in 2009, compared with a 1.9 percent drop for the rest of the handset industry.
Research In Motion expects fourth-quarter sales to be “at or near the mid-point” of the forecast range of $3.3 billion to $3.5 billion. Analysts on average projected $3.4 billion.
“Tech has been able to perform well, and now we’ve got RIM coming out with this and it shows that no sector is safe,” said Suzanne Bodlovic, an independent equity futures trader at the Chicago Board of Trade. “Everyone’s earnings are going to be less then expected.”
Gross margin, or the percentage of sales left after production costs, also will be at the lower end, Research In Motion said today. The results suggest the latest models, such as the Storm and the Bold, have won fewer customers than some of the older BlackBerrys, according to analysts.
“There was a lot of hope that the Bold and Storm would be blockbuster products,” said Scott Pope, a Chicago-based analyst with First Analysis Corp. “Customers may not be responding as well as expected to the newer products.”
Subscriber gains will be 20 percent higher than the 2.9 million forecast in December, Research In Motion said. The company introduced more consumer-friendly models to compete with Apple Inc.’s iPhone 3G, vying for a dwindling pool of spending as the economic slump intensifies. Consumer spending in the U.S. fell in December for a record sixth consecutive month, capping the worst year since 1961.
“They cannot grow in the way they’ve been growing if they just focus on the enterprise,” said Anil Doradla, an analyst with William Blair & Co. in Chicago. “The only issue and challenge is the minute you get into the consumer space, some of the business models are changing.”
The stock fell $8.28, or 15 percent, to $48.76 at 4 p.m. New York time in Nasdaq Stock Market trading, the biggest decline since Sept. 26. Research In Motion has dropped 48 percent in the past year.
Storm Deals
The company introduced the touch-screen Storm in November in the U.S. exclusively through Verizon Wireless. The two began a “buy-one-get-one-free” sale last week as the recession deepens into the worst financial crisis in at least 25 years. Amazon.com Inc., the world’s largest online retailer, now sells the Storm for $99.99 with a service plan, according to its Web site.
Waterloo, Ontario-based Research In Motion had projected fourth-quarter profit of at least 83 cents a share, compared with the 86-cent average of estimates compiled by Bloomberg. The company said in December that margins narrowed as new phones, such as the BlackBerry Storm, made up for a larger percentage of sales.
So-called smart phones such as the Storm are capable of surfing the Web and downloading video at high speeds. Apple, based in Cupertino, California, debuted the latest model of the iPhone in July. Palm Inc. also plans to introduce a new model, the Pre, in the first half of the year.
The new devices will heighten competition for Research In Motion as the pool of new subscribers in the U.S. shrinks, with more than 80 percent of people already carrying a mobile phone.
Smart Phones
The smart-phone market overall will grow next year even as sales of other devices drop, research firm IDC said in December. The market will expand 8.9 percent worldwide in 2009, compared with a 1.9 percent drop for the rest of the handset industry.
Research In Motion expects fourth-quarter sales to be “at or near the mid-point” of the forecast range of $3.3 billion to $3.5 billion. Analysts on average projected $3.4 billion.
“Tech has been able to perform well, and now we’ve got RIM coming out with this and it shows that no sector is safe,” said Suzanne Bodlovic, an independent equity futures trader at the Chicago Board of Trade. “Everyone’s earnings are going to be less then expected.”
BCE Profit Exceeds Estimates; Company Boosts Dividend
Feb. 11 (Bloomberg) -- BCE Inc., Canada’s largest phone company, forecast earnings for this year that topped analysts’ estimates and increased its dividend after adding more mobile- phone subscribers last quarter.
Profit, excluding some costs and gains, will climb more than 5 percent this year, Toronto-based BCE said today. That amounts to more than C$2.36 ($1.90) a share, beating the C$2.12 average of estimates compiled by Bloomberg. The company also predicted “stable” revenue.
BCE raised its annual dividend payout by 5 percent. George Cope, who became chief executive officer in July, reinstated dividends and bought back shares to win over investors after the stock fell 37 percent last year. The shares slumped after the failure of a C$52 billion takeover attempt from investors led by the Ontario Teachers’ Pension Plan, Canada’s third-largest pension fund.
“It’s good to see that George Cope is in place and seems to be moving the company forward, and seems to be taking action,” Wayne Kozun, head of equities at Teachers’, said in an interview today. The Toronto-based pension fund retains an undisclosed stake in BCE. “We’re helping them focus on areas that will improve shareholder value.”
BCE is competing with Rogers Communications Inc. and Telus Corp. for customers amid a shrinking Canadian economy. Cope is cutting jobs and using the savings to invest more in the Bell premium wireless service for smart phones and the Solo budget brand. BCE will add or revamp 65 kiosks to sell Solo mobile phones this year, Cope said.
Discount Market
“The discount market for wireless has opened up and we’ve got to be playing in it,” Cope told reporters today. “In this economy, people are going to be more price-sensitive.”
BCE climbed 36 cents, or 1.4 percent, to C$25.49 at 4:16 p.m. on the Toronto Stock Exchange.
BCE lost 72,000 residential land-line customers last quarter, less than the 110,000 predicted by National Bank analyst Greg MacDonald. BCE added 117,000 net new wireless subscribers, missing MacDonald’s 158,000 estimate.
Excluding reorganization costs and other items, fourth- quarter profit amounted to 55 cents a share, compared with the 51-cent average of estimates compiled by Bloomberg.
The company reported a net loss of C$48 million, or 6 cents a share, compared with a profit of C$2.35 billion, or C$2.93, a year earlier. BCE booked a gain from the sale of its satellite unit in the 2007 quarter. In the 2008 period, the carrier incurred 47 cents a share in costs on investments and 14 cents for restructuring.
Takeover Offer
Sales were little changed at C$4.49 billion. Cope is scheduled to outline his strategy at BCE’s shareholder meeting in Montreal Feb. 17. This is BCE’s first quarter since Ontario Teachers’ and its partners abandoned their takeover offer in December.
Teachers’, Providence Equity Partners Inc., Madison Dearborn Partners LLC and the buyout unit of Merrill Lynch & Co. dropped their bid Dec. 11 after an auditor said the transaction would render the carrier insolvent. BCE is seeking C$1.2 billion in damages from the bidders, arguing they withdrew from the takeover prematurely.
-- With reporting by Doug Alexander in Toronto. Editors: Julie Alnwick, Jonathan Thaw
Profit, excluding some costs and gains, will climb more than 5 percent this year, Toronto-based BCE said today. That amounts to more than C$2.36 ($1.90) a share, beating the C$2.12 average of estimates compiled by Bloomberg. The company also predicted “stable” revenue.
BCE raised its annual dividend payout by 5 percent. George Cope, who became chief executive officer in July, reinstated dividends and bought back shares to win over investors after the stock fell 37 percent last year. The shares slumped after the failure of a C$52 billion takeover attempt from investors led by the Ontario Teachers’ Pension Plan, Canada’s third-largest pension fund.
“It’s good to see that George Cope is in place and seems to be moving the company forward, and seems to be taking action,” Wayne Kozun, head of equities at Teachers’, said in an interview today. The Toronto-based pension fund retains an undisclosed stake in BCE. “We’re helping them focus on areas that will improve shareholder value.”
BCE is competing with Rogers Communications Inc. and Telus Corp. for customers amid a shrinking Canadian economy. Cope is cutting jobs and using the savings to invest more in the Bell premium wireless service for smart phones and the Solo budget brand. BCE will add or revamp 65 kiosks to sell Solo mobile phones this year, Cope said.
Discount Market
“The discount market for wireless has opened up and we’ve got to be playing in it,” Cope told reporters today. “In this economy, people are going to be more price-sensitive.”
BCE climbed 36 cents, or 1.4 percent, to C$25.49 at 4:16 p.m. on the Toronto Stock Exchange.
BCE lost 72,000 residential land-line customers last quarter, less than the 110,000 predicted by National Bank analyst Greg MacDonald. BCE added 117,000 net new wireless subscribers, missing MacDonald’s 158,000 estimate.
Excluding reorganization costs and other items, fourth- quarter profit amounted to 55 cents a share, compared with the 51-cent average of estimates compiled by Bloomberg.
The company reported a net loss of C$48 million, or 6 cents a share, compared with a profit of C$2.35 billion, or C$2.93, a year earlier. BCE booked a gain from the sale of its satellite unit in the 2007 quarter. In the 2008 period, the carrier incurred 47 cents a share in costs on investments and 14 cents for restructuring.
Takeover Offer
Sales were little changed at C$4.49 billion. Cope is scheduled to outline his strategy at BCE’s shareholder meeting in Montreal Feb. 17. This is BCE’s first quarter since Ontario Teachers’ and its partners abandoned their takeover offer in December.
Teachers’, Providence Equity Partners Inc., Madison Dearborn Partners LLC and the buyout unit of Merrill Lynch & Co. dropped their bid Dec. 11 after an auditor said the transaction would render the carrier insolvent. BCE is seeking C$1.2 billion in damages from the bidders, arguing they withdrew from the takeover prematurely.
-- With reporting by Doug Alexander in Toronto. Editors: Julie Alnwick, Jonathan Thaw
Asian Stocks Fall on Doubts U.S. Stimulus Will Revive Growth
Feb. 12 (Bloomberg) -- Asian stocks fell for a fourth day, led by financial and consumer-related companies, on concern U.S. measures to alleviate the financial crisis won’t be enough to revive the world’s largest economy.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest lender, fell 3.1 percent as U.S. Treasury Secretary Timothy Geithner said he needs time to work out details of a bank-rescue plan unveiled on Feb. 10. Daikin Industries Ltd., the biggest Japanese maker of air conditioners, dropped 2.9 percent after cutting its profit forecast. Newcrest Mining Ltd., Australia’s largest gold producer, rose 4.6 percent after gold futures climbed in New York.
“The market had been awaiting the financial bailout plan with high hopes, but what was announced didn’t have much meat on the bone,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television. “It’s unfortunate, but stocks are in for a rough day.”
The MSCI Asia Pacific Index fell 0.8 percent to 82.29 at 10:42 a.m. in Tokyo. More than two stocks advanced for each one that declined. The gauge has lost 8.2 percent this year, furthering a record 43 percent tumble in 2008, as the credit crisis triggered by the collapse of the U.S. housing market spun into a global recession.
The Nikkei 225 Stock Average slumped 1.7 percent, to 7,814.01. The Japanese market resumed trading today following yesterday’s holiday. Australia’s S&P/ASX 200 Index climbed 1.6 percent, while South Korea’s Kospi index slipped 0.8 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The index gained 0.8 percent yesterday as Congress debated a $789 billion spending plan. U.S. House and Senate lawmakers agreed on a compromise late yesterday, a smaller bill than those originally approved by both groups.
Stimulus Agreement
Geithner announced two days ago a financial rescue plan that included as much as $2 trillion in funding for programs aimed at spurring new lending and addressing banks’ illiquid assets. The U.S. government was going to proceed “carefully” on the proposal, Geithner told Congress yesterday.
Governments around the world are stepping up efforts to revive global growth that the International Monetary Fund predicted two weeks ago will grind almost to a halt this year. The Bank of Korea cut its benchmark interest rate today to a record-low 2 percent to revive an economy headed for the first recession in more than a decade.
Mitsubishi UFJ fell 3.1 percent to 470 yen in Tokyo. Toyota Motor Corp., which makes 37 percent of its sales in North America, dropped 2.6 percent to 3,060 yen.
Daikin fell 2.9 percent to 2,165 yen after it cut its profit forecast by 59 percent for the year ending March 31 as the slumping global economy dragged sales.
Newcrest Mining climbed 4.6 percent to A$33.83. Gold futures in New York jumped 3.3 percent yesterday, extending the previous day’s 2.4 percent advance. Silver and platinum jumped to four- month highs.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest lender, fell 3.1 percent as U.S. Treasury Secretary Timothy Geithner said he needs time to work out details of a bank-rescue plan unveiled on Feb. 10. Daikin Industries Ltd., the biggest Japanese maker of air conditioners, dropped 2.9 percent after cutting its profit forecast. Newcrest Mining Ltd., Australia’s largest gold producer, rose 4.6 percent after gold futures climbed in New York.
“The market had been awaiting the financial bailout plan with high hopes, but what was announced didn’t have much meat on the bone,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television. “It’s unfortunate, but stocks are in for a rough day.”
The MSCI Asia Pacific Index fell 0.8 percent to 82.29 at 10:42 a.m. in Tokyo. More than two stocks advanced for each one that declined. The gauge has lost 8.2 percent this year, furthering a record 43 percent tumble in 2008, as the credit crisis triggered by the collapse of the U.S. housing market spun into a global recession.
The Nikkei 225 Stock Average slumped 1.7 percent, to 7,814.01. The Japanese market resumed trading today following yesterday’s holiday. Australia’s S&P/ASX 200 Index climbed 1.6 percent, while South Korea’s Kospi index slipped 0.8 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The index gained 0.8 percent yesterday as Congress debated a $789 billion spending plan. U.S. House and Senate lawmakers agreed on a compromise late yesterday, a smaller bill than those originally approved by both groups.
Stimulus Agreement
Geithner announced two days ago a financial rescue plan that included as much as $2 trillion in funding for programs aimed at spurring new lending and addressing banks’ illiquid assets. The U.S. government was going to proceed “carefully” on the proposal, Geithner told Congress yesterday.
Governments around the world are stepping up efforts to revive global growth that the International Monetary Fund predicted two weeks ago will grind almost to a halt this year. The Bank of Korea cut its benchmark interest rate today to a record-low 2 percent to revive an economy headed for the first recession in more than a decade.
Mitsubishi UFJ fell 3.1 percent to 470 yen in Tokyo. Toyota Motor Corp., which makes 37 percent of its sales in North America, dropped 2.6 percent to 3,060 yen.
Daikin fell 2.9 percent to 2,165 yen after it cut its profit forecast by 59 percent for the year ending March 31 as the slumping global economy dragged sales.
Newcrest Mining climbed 4.6 percent to A$33.83. Gold futures in New York jumped 3.3 percent yesterday, extending the previous day’s 2.4 percent advance. Silver and platinum jumped to four- month highs.
Indian Stocks Snap Three-Day Rally, Led by Software Exporters
Feb. 11 (Bloomberg) -- India’s key stock index fell, capping a three-day, 6.1 percent rally. Tata Consultancy Services Ltd. led software exporters lower on concern the proposed U.S. bank rescue will fail to boost the sector’s biggest market.
Tata Consultancy, India’s largest software developer, fell 1.9 percent. Wipro Ltd., the No. 3, declined 1.7 percent. Bharti Airtel Ltd. led mobile-phone operators higher after they added 9.3 million customers last month.
“Even with $2 trillion in bailouts, the U.S. will still find it difficult to stem the rot,” said Jayesh Shroff, who helps manage $1.5 billion in equities at SBI Asset Management Co. in Mumbai. “They will have to bite the poison pill and create a bad bank to mop-up toxic assets.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 28.93, or 0.3 percent, to 9,618.54. The S&P CNX Nifty Index on the National Stock Exchange slid 8.8, or 0.3 percent, to 2,925.70. The BSE 200 Index fell 0.1 percent to 1,127.30. S&P CNX Nifty futures for February delivery added 0.4 percent to 2,938.
Tata Consultancy fell 1.9 percent to 514.75 rupees. Infosys Technologies Ltd., the second-biggest software exporter, slid 0.5 percent to 1,301.90 rupees. Wipro Ltd. declined 1.7 percent to 221.95 rupees.
The U.S. Standard & Poor’s 500 Index slumped 4.9 percent yesterday amid skepticism the government’s bank rescue will work, even as Treasury Secretary Timothy Geithner pledged up to $2 trillion in financing for programs aimed at spurring new lending and addressing banks’ toxic assets. The U.S. accounts for more than half the revenue of software developers.
More Mobile Users
Bharti, the nation’s largest mobile-phone operator, gained 1.5 percent to 673.45 rupees. Reliance Communications Ltd., India’s second-largest operator, gained 1 percent to 173.30 rupees. Idea Cellular Ltd. added 5.4 percent to 47.60 rupees.
Bharti added 2.73 million users in January, while Idea added 2 million customers, according to the Cellular Operators Association of India, an industry group.
“Assuming Reliance Communications added 1 million GSM subscribers and a similar number of CDMA net additions, the overall wireless net additions for India in January would cross 12.5 million, making it the highest wireless net addition per month in the world,” Morgan Stanley said in a note to clients.
Tata Steel Ltd. led producers of the alloy lower after ArcelorMittal, the world’s biggest steelmaker, posted a fourth- quarter loss as prices slumped and the worldwide economic downturn curbed demand.
Steelmakers Drop
Tata Steel, India’s largest steelmaker, fell 3.4 percent to 190.15 rupees. JSW Steel Ltd., the No. 3 producer, slid 2.1 percent to 219.80 rupees. Jindal Steel & Power Ltd., an Indian steel and power producer, declined 2.3 percent to 1,051.05 rupees.
Overseas investors bought a net 2.89 billion rupees ($59.4 million) of Indian stocks on Feb. 9, according to the nation’s market regulator.
The following were among the most active shares traded on the Bombay and National stock exchanges. Stock symbols are in parentheses after company names:
Axis Bank Ltd. (AXSB IN) rose 2.4 percent to 430.95 rupees. The country’s fourth-biggest bank by market value will replace Zee Entertainment Enterprises Ltd. (Z IN) in the National Stock Exchange’s S&P CNX Nifty Index. The changes in the key index will be effective March 27, the exchange said. Zee dropped 12 percent to 113.90, the most since October.
Maytas Infra Ltd. (MAY IN) rose 5 percent to 54.15 rupees. The construction company run by the family of the former chairman of Satyam Computer Services Ltd. gained for the first time since Jan. 6 on a Business Standard report that Infrastructure Leasing & Financial Services Ltd. may take control. IL&FS holds about 20 percent of Maytas shares pledged to it by the Raju family, Business Standard said.
TTK Healthcare Ltd. (TTKP IN) gained 15 percent to 94.30 rupees, the most since January 2008. The Indian maker of herbal tonics and shoe-polish rose after announcing that a buyback offer will start on Feb. 18.
The company in July last year approved a plan to spend 110.6 million rupees to buy back its shares at not more than 120 rupees apiece.
Tata Consultancy, India’s largest software developer, fell 1.9 percent. Wipro Ltd., the No. 3, declined 1.7 percent. Bharti Airtel Ltd. led mobile-phone operators higher after they added 9.3 million customers last month.
“Even with $2 trillion in bailouts, the U.S. will still find it difficult to stem the rot,” said Jayesh Shroff, who helps manage $1.5 billion in equities at SBI Asset Management Co. in Mumbai. “They will have to bite the poison pill and create a bad bank to mop-up toxic assets.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 28.93, or 0.3 percent, to 9,618.54. The S&P CNX Nifty Index on the National Stock Exchange slid 8.8, or 0.3 percent, to 2,925.70. The BSE 200 Index fell 0.1 percent to 1,127.30. S&P CNX Nifty futures for February delivery added 0.4 percent to 2,938.
Tata Consultancy fell 1.9 percent to 514.75 rupees. Infosys Technologies Ltd., the second-biggest software exporter, slid 0.5 percent to 1,301.90 rupees. Wipro Ltd. declined 1.7 percent to 221.95 rupees.
The U.S. Standard & Poor’s 500 Index slumped 4.9 percent yesterday amid skepticism the government’s bank rescue will work, even as Treasury Secretary Timothy Geithner pledged up to $2 trillion in financing for programs aimed at spurring new lending and addressing banks’ toxic assets. The U.S. accounts for more than half the revenue of software developers.
More Mobile Users
Bharti, the nation’s largest mobile-phone operator, gained 1.5 percent to 673.45 rupees. Reliance Communications Ltd., India’s second-largest operator, gained 1 percent to 173.30 rupees. Idea Cellular Ltd. added 5.4 percent to 47.60 rupees.
Bharti added 2.73 million users in January, while Idea added 2 million customers, according to the Cellular Operators Association of India, an industry group.
“Assuming Reliance Communications added 1 million GSM subscribers and a similar number of CDMA net additions, the overall wireless net additions for India in January would cross 12.5 million, making it the highest wireless net addition per month in the world,” Morgan Stanley said in a note to clients.
Tata Steel Ltd. led producers of the alloy lower after ArcelorMittal, the world’s biggest steelmaker, posted a fourth- quarter loss as prices slumped and the worldwide economic downturn curbed demand.
Steelmakers Drop
Tata Steel, India’s largest steelmaker, fell 3.4 percent to 190.15 rupees. JSW Steel Ltd., the No. 3 producer, slid 2.1 percent to 219.80 rupees. Jindal Steel & Power Ltd., an Indian steel and power producer, declined 2.3 percent to 1,051.05 rupees.
Overseas investors bought a net 2.89 billion rupees ($59.4 million) of Indian stocks on Feb. 9, according to the nation’s market regulator.
The following were among the most active shares traded on the Bombay and National stock exchanges. Stock symbols are in parentheses after company names:
Axis Bank Ltd. (AXSB IN) rose 2.4 percent to 430.95 rupees. The country’s fourth-biggest bank by market value will replace Zee Entertainment Enterprises Ltd. (Z IN) in the National Stock Exchange’s S&P CNX Nifty Index. The changes in the key index will be effective March 27, the exchange said. Zee dropped 12 percent to 113.90, the most since October.
Maytas Infra Ltd. (MAY IN) rose 5 percent to 54.15 rupees. The construction company run by the family of the former chairman of Satyam Computer Services Ltd. gained for the first time since Jan. 6 on a Business Standard report that Infrastructure Leasing & Financial Services Ltd. may take control. IL&FS holds about 20 percent of Maytas shares pledged to it by the Raju family, Business Standard said.
TTK Healthcare Ltd. (TTKP IN) gained 15 percent to 94.30 rupees, the most since January 2008. The Indian maker of herbal tonics and shoe-polish rose after announcing that a buyback offer will start on Feb. 18.
The company in July last year approved a plan to spend 110.6 million rupees to buy back its shares at not more than 120 rupees apiece.
Tuesday, February 10, 2009
Atmel, CB Richard Ellis, Cerner, Nvidia: U.S. Equity Preview
Feb. 10 (Bloomberg) -- Shares of the following companies may have unusual fluctuations in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:30 p.m. in New York.
Standard & Poor’s 500 Index futures expiring in March rose 0.4 percent to 829.80.
Atmel Corp. (ATML:US) fell 5.1 percent to $3.69. Microchip Technology Inc. (MCHP:US) said it’s ending consideration of a potential purchase of Atmel and withdrawing the slate of directors it nominated for the chipmaker’s board.
CB Richard Ellis Group Inc. (CBG:US) rose 11 percent to $4.20. The world’s largest commercial-property broker reported profit excluding some items of 37 cents a share in the fourth quarter. That beat the 27-cent average estimate in a Bloomberg survey of analysts.
Cerner Corp. (CERN:US) rose 5.2 percent to $38. The maker of software for electronic medical records said that, excluding some items, it earned 65 cents a share in the fourth quarter. That’s 6 percent higher than the average estimate from analysts, according to Bloomberg data.
CF Industries Holdings Inc. (CF:US) rose 3.1 percent to $55.26. The U.S. maker of nitrogen-based crop nutrients posted earnings excluding some items of $4.29 a share in the fourth quarter. That almost doubled the average analyst estimate, according to Bloomberg data.
Nvidia Corp. (NVDA:US) fell 2.9 percent to $9.05. The second-largest maker of graphics chips reported a fiscal fourth- quarter loss excluding items of 18 cents a share after computer makers and consumers cut back on purchases. That’s wider than the 11-cent average loss expected by analysts, according to a Bloomberg survey.
Standard & Poor’s 500 Index futures expiring in March rose 0.4 percent to 829.80.
Atmel Corp. (ATML:US) fell 5.1 percent to $3.69. Microchip Technology Inc. (MCHP:US) said it’s ending consideration of a potential purchase of Atmel and withdrawing the slate of directors it nominated for the chipmaker’s board.
CB Richard Ellis Group Inc. (CBG:US) rose 11 percent to $4.20. The world’s largest commercial-property broker reported profit excluding some items of 37 cents a share in the fourth quarter. That beat the 27-cent average estimate in a Bloomberg survey of analysts.
Cerner Corp. (CERN:US) rose 5.2 percent to $38. The maker of software for electronic medical records said that, excluding some items, it earned 65 cents a share in the fourth quarter. That’s 6 percent higher than the average estimate from analysts, according to Bloomberg data.
CF Industries Holdings Inc. (CF:US) rose 3.1 percent to $55.26. The U.S. maker of nitrogen-based crop nutrients posted earnings excluding some items of $4.29 a share in the fourth quarter. That almost doubled the average analyst estimate, according to Bloomberg data.
Nvidia Corp. (NVDA:US) fell 2.9 percent to $9.05. The second-largest maker of graphics chips reported a fiscal fourth- quarter loss excluding items of 18 cents a share after computer makers and consumers cut back on purchases. That’s wider than the 11-cent average loss expected by analysts, according to a Bloomberg survey.
China Needs U.S. Guarantees for Treasury Bond Holdings, Yu Says
Feb. 11 (Bloomberg) -- China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.
Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.
China may voice its concerns over U.S. government finances and the potential for a weaker dollar when Secretary of State Hillary Clinton visits China on Feb. 20, according to He Zhicheng, an economist at Agricultural Bank of China, the nation’s third-largest lender by assets.
“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”
Chinese Foreign Ministry Spokeswoman Jiang Yu said yesterday that talks with Clinton would cover bilateral relations, the financial crisis and international affairs, according the Xinhua news agency.
Treasury Returns
U.S. government bonds returned 14 percent last year including price gains and reinvested interest, the most since rallying 18.5 percent in 1995, according to indexes compiled by Merrill Lynch & Co. Concern that the flood of bonds would overwhelm demand caused Treasuries to lose 3.08 percent in January, the steepest drop in almost five years, Merrill data show. The yield on the benchmark 10-year U.S. Treasury has risen to 2.83 percent from 2.21 percent at the end of last year.
China’s loss of more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007 may increase its demand for the relative safety of Treasuries.
“The government will be a net buyer of Treasuries in the short-term because there’s no sign they have changed their strategy,” said Zhang Ming, secretary general of international finance research center at the Chinese Academy of Social Sciences in Beijing. “But personally, I don’t think we should increase holdings because the medium- and long-term risks are quite high.”
Currency Reserves
China’s foreign-exchange reserves, the world’s biggest, grew about $40 billion in the fourth quarter, the smallest expansion since mid-2004 as an end to yuan appreciation since July prompted investors to pull money out.
The world’s third-biggest economy grew 6.8 percent in the fourth quarter, the slowest pace in seven years. Policy makers cut interest rates by the most in 11 years and announced a 4 trillion yuan ($585 billion) economic stimulus plan in November to spur domestic demand.
Yu said China won’t channel its reserves toward stimulating the economy because its trade surplus is sufficient to fund any import needs. China’s trade surplus was $39 billion in December, the second-largest on record.
A decline in reserves “isn’t likely because of China’s huge twin surpluses,” Yu said. China “should diversify its reserves away from U.S. Treasuries if the value of China’s foreign- exchange reserves is in danger of being inflated away by the U.S. government’s pump-priming,” he said.
Linking Disputes
China may try to link trade and currency policy disputes to its future investment in Treasuries, said Lu Zhengwei, an economist in Shanghai at Industrial Bank Co., a Chinese lender partly owned by a unit of HSBC Holdings Plc.
U.S. Treasury Secretary Timothy Geithner accused China on Jan. 22 of “manipulating” the yuan to give an unfair advantage to its exporters in the global market. The currency has dropped 0.14 percent since the start of this year to 6.8326 per dollar, following a 21 percent gain since a peg against the dollar was abandoned in July 2005.
“China can also use this opportunity to get a promise from the U.S. not to make inappropriate requests on bilateral trade and the Chinese yuan,” Lu said. “We can’t afford more yuan appreciation as the economy is facing a serious slowdown.”
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.
Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.
China may voice its concerns over U.S. government finances and the potential for a weaker dollar when Secretary of State Hillary Clinton visits China on Feb. 20, according to He Zhicheng, an economist at Agricultural Bank of China, the nation’s third-largest lender by assets.
“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”
Chinese Foreign Ministry Spokeswoman Jiang Yu said yesterday that talks with Clinton would cover bilateral relations, the financial crisis and international affairs, according the Xinhua news agency.
Treasury Returns
U.S. government bonds returned 14 percent last year including price gains and reinvested interest, the most since rallying 18.5 percent in 1995, according to indexes compiled by Merrill Lynch & Co. Concern that the flood of bonds would overwhelm demand caused Treasuries to lose 3.08 percent in January, the steepest drop in almost five years, Merrill data show. The yield on the benchmark 10-year U.S. Treasury has risen to 2.83 percent from 2.21 percent at the end of last year.
China’s loss of more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007 may increase its demand for the relative safety of Treasuries.
“The government will be a net buyer of Treasuries in the short-term because there’s no sign they have changed their strategy,” said Zhang Ming, secretary general of international finance research center at the Chinese Academy of Social Sciences in Beijing. “But personally, I don’t think we should increase holdings because the medium- and long-term risks are quite high.”
Currency Reserves
China’s foreign-exchange reserves, the world’s biggest, grew about $40 billion in the fourth quarter, the smallest expansion since mid-2004 as an end to yuan appreciation since July prompted investors to pull money out.
The world’s third-biggest economy grew 6.8 percent in the fourth quarter, the slowest pace in seven years. Policy makers cut interest rates by the most in 11 years and announced a 4 trillion yuan ($585 billion) economic stimulus plan in November to spur domestic demand.
Yu said China won’t channel its reserves toward stimulating the economy because its trade surplus is sufficient to fund any import needs. China’s trade surplus was $39 billion in December, the second-largest on record.
A decline in reserves “isn’t likely because of China’s huge twin surpluses,” Yu said. China “should diversify its reserves away from U.S. Treasuries if the value of China’s foreign- exchange reserves is in danger of being inflated away by the U.S. government’s pump-priming,” he said.
Linking Disputes
China may try to link trade and currency policy disputes to its future investment in Treasuries, said Lu Zhengwei, an economist in Shanghai at Industrial Bank Co., a Chinese lender partly owned by a unit of HSBC Holdings Plc.
U.S. Treasury Secretary Timothy Geithner accused China on Jan. 22 of “manipulating” the yuan to give an unfair advantage to its exporters in the global market. The currency has dropped 0.14 percent since the start of this year to 6.8326 per dollar, following a 21 percent gain since a peg against the dollar was abandoned in July 2005.
“China can also use this opportunity to get a promise from the U.S. not to make inappropriate requests on bilateral trade and the Chinese yuan,” Lu said. “We can’t afford more yuan appreciation as the economy is facing a serious slowdown.”
Asian Stocks Drop on Concern Obama Bank Plan Won’t Ease Crisis
Feb. 11 (Bloomberg) -- Asian stocks fell, led by banks and commodity companies, on concern U.S. President Barack Obama’s plan to revive the economy and financial system may not be enough to ease the recession.
National Australia Bank Ltd., the nation’s biggest by assets, lost 1.3 percent, after U.S. Treasury Secretary Timothy Geithner said the recovery plan will “take time” to bear fruit. BHP Billiton Ltd., the world’s largest mining company, fell 2.8 percent in Sydney on concern commodity demand will drop. Neptune Orient Lines Ltd., Southeast Asia’s biggest container carrier, slumped 3.2 percent in Singapore after forecasting a loss.
“The market seems to be unhappy with any solution that doesn’t involve full nationalization of the banks,” said San Francisco-based Robert Horrocks, who helps manage about $4.7 billion including Asian equities at Matthews International Capital Management LLC. “You’re starting to see some life in the credit markets, but most of the leading indicators are still pointing downwards.”
The MSCI Asia Pacific Index that excludes Japan fell 2 percent to 232.20 at 9:51 a.m. in Singapore. The gauge that includes Japan has fallen 7.6 percent this year, extending 2008’s record 43 percent decline as the world’s biggest economies sank into recession.
Japan’s stock market, the world’s second largest, is closed today for a holiday. All other markets open for trading dropped, led by a 1.3 percent drop in South Korea’s Kospi Index. The S&P/ASX 200 Index lost 0.8 percent.
Rio Tinto Ltd., BHP’s smaller rival, rose 2.3 percent on speculation Aluminum Corp. of China, the nation’s biggest producer of the metal, may invest as much as to $20 billion.
Falling Demand
U.S. stocks fell yesterday, sending the Standard & Poor’s 500 Index to its biggest decline since Obama’s inauguration, while Treasuries rallied and the dollar rose on skepticism that the government’s bank rescue will work. Futures on the S&P 500 added 0.4 percent today.
Treasury Secretary Timothy Geithner pledged up to $2 trillion in government financing for programs aimed at spurring new lending and addressing banks’ toxic assets. The plan includes limits on bank dividends and acquisitions.
National Australia Bank fell 1.3 percent to A$18.50 after a report showed Australian consumer confidence slumped in February as rising unemployment and falling property prices eroded households’ view of the economic outlook for the next 12 months. Australia New Zealand Banking Group Ltd., Australia’s fourth- biggest lender, slipped 2.1 percent to A$12.19.
BHP Billiton slid 2.8 percent to A$32.42 as metal and oil prices fell in New York, with copper sliding 1.6 percent and crude oil slumping 5.1 percent. Oil futures rose 1.2 percent to $38 a barrel in after-hours trading.
Rio Investment?
Samsung Electronics Co., the world’s No. 1 memory-chip maker, fell 1.2 percent to 514,000 won in Seoul. The stock paced declines among technology companies amid concern demand for computer components and consumer electronics products made in Asia will decline.
Hyundai Motor Co., the biggest South Korean carmaker, dropped 1.7 percent to 50,700 won in Seoul. The stock was cut to “equal-weight” from “overweight” at Morgan Stanley, which said access to auto financing in the country remains difficult.
Neptune slumped 3.2 percent to S$1.20 after forecasting a fourth-quarter loss as the global recession damps demand for transporting Asian-made goods.
Rio Tinto rose 2.3 percent to A$50.09. Aluminium Corp. of China is in talks to buy bonds that will convert into Rio shares and purchase stakes in Rio mines, a person with knowledge of the matter told Bloomberg News. An announcement is planned for Feb. 12 when Rio publishes its annual earnings, the person said.
National Australia Bank Ltd., the nation’s biggest by assets, lost 1.3 percent, after U.S. Treasury Secretary Timothy Geithner said the recovery plan will “take time” to bear fruit. BHP Billiton Ltd., the world’s largest mining company, fell 2.8 percent in Sydney on concern commodity demand will drop. Neptune Orient Lines Ltd., Southeast Asia’s biggest container carrier, slumped 3.2 percent in Singapore after forecasting a loss.
“The market seems to be unhappy with any solution that doesn’t involve full nationalization of the banks,” said San Francisco-based Robert Horrocks, who helps manage about $4.7 billion including Asian equities at Matthews International Capital Management LLC. “You’re starting to see some life in the credit markets, but most of the leading indicators are still pointing downwards.”
The MSCI Asia Pacific Index that excludes Japan fell 2 percent to 232.20 at 9:51 a.m. in Singapore. The gauge that includes Japan has fallen 7.6 percent this year, extending 2008’s record 43 percent decline as the world’s biggest economies sank into recession.
Japan’s stock market, the world’s second largest, is closed today for a holiday. All other markets open for trading dropped, led by a 1.3 percent drop in South Korea’s Kospi Index. The S&P/ASX 200 Index lost 0.8 percent.
Rio Tinto Ltd., BHP’s smaller rival, rose 2.3 percent on speculation Aluminum Corp. of China, the nation’s biggest producer of the metal, may invest as much as to $20 billion.
Falling Demand
U.S. stocks fell yesterday, sending the Standard & Poor’s 500 Index to its biggest decline since Obama’s inauguration, while Treasuries rallied and the dollar rose on skepticism that the government’s bank rescue will work. Futures on the S&P 500 added 0.4 percent today.
Treasury Secretary Timothy Geithner pledged up to $2 trillion in government financing for programs aimed at spurring new lending and addressing banks’ toxic assets. The plan includes limits on bank dividends and acquisitions.
National Australia Bank fell 1.3 percent to A$18.50 after a report showed Australian consumer confidence slumped in February as rising unemployment and falling property prices eroded households’ view of the economic outlook for the next 12 months. Australia New Zealand Banking Group Ltd., Australia’s fourth- biggest lender, slipped 2.1 percent to A$12.19.
BHP Billiton slid 2.8 percent to A$32.42 as metal and oil prices fell in New York, with copper sliding 1.6 percent and crude oil slumping 5.1 percent. Oil futures rose 1.2 percent to $38 a barrel in after-hours trading.
Rio Investment?
Samsung Electronics Co., the world’s No. 1 memory-chip maker, fell 1.2 percent to 514,000 won in Seoul. The stock paced declines among technology companies amid concern demand for computer components and consumer electronics products made in Asia will decline.
Hyundai Motor Co., the biggest South Korean carmaker, dropped 1.7 percent to 50,700 won in Seoul. The stock was cut to “equal-weight” from “overweight” at Morgan Stanley, which said access to auto financing in the country remains difficult.
Neptune slumped 3.2 percent to S$1.20 after forecasting a fourth-quarter loss as the global recession damps demand for transporting Asian-made goods.
Rio Tinto rose 2.3 percent to A$50.09. Aluminium Corp. of China is in talks to buy bonds that will convert into Rio shares and purchase stakes in Rio mines, a person with knowledge of the matter told Bloomberg News. An announcement is planned for Feb. 12 when Rio publishes its annual earnings, the person said.
Reliance Power’s Plants Face Delay as Credit Crunch Slows Loans
Feb. 11 (Bloomberg) -- Reliance Power Ltd., the utility that sold shares in India’s biggest initial public offering last year, may face delays in building its largest coal-fired plants as the global credit crunch holds up loan approvals.
“The lead time for getting loans has increased,” Chief Executive Officer Jayarama Chalasani said by telephone in Mumbai.
The Mumbai-based company is 25 billion rupees short of the 145 billion rupees ($3 billion) it needs to borrow for its first 4,000 megawatt plant at Sasan in central India, Chalasani said in an interview. Reliance Power expects to raise funds for a similar plant at Krishnapatnam in the south by June, he said.
Reliance Power, controlled by billionaire Anil Ambani, sought to borrow $4 billion overseas for the projects by December and was forced to seek rupee loans instead after banks led by Standard Chartered Plc asked for more time to study proposals. A dispute over the supply of natural gas has stalled the utility’s largest plant in northern India and contributed to the 56 percent slump in its shares since they started trading a year earlier.
“The delay in raising funds may hurt Sasan’s completion schedule,” said Abhineet Anand, Mumbai-based analyst at Antique Broking Ltd. “The timing of raising funds is key to Sasan and other large Indian power projects.”
The company, which is yet to start producing power, has borrowed 120 billion rupees for Sasan from a group of 12 banks led by the State Bank of India and expects to get the rest by the end of this month, Chalasani said. Work on the plant in Madhya Pradesh state has already started to ensure that loan delays don’t affect the completion schedule, he said.
Overseas Loans
The rupee debt will be repaid when the company secures dollar-denominated loans from overseas banks, the CEO said. Reliance Power has appointed Standard Chartered as lead banker and China Development Bank Corp. for the overseas borrowings.
The overseas loan for Sasan was delayed because it is “the largest to be raised on a project-finance basis,” Chalasani said yesterday. “Banks, therefore, need more time to examine the expense side of the business including mining technology and capital and operating expenses. This is much more complicated and is completely different from financing any other power project.”
He declined to give a timeline for obtaining overseas loans.
The first phase of the Sasan project is scheduled to be completed by December 2011 and the second by March 2013. The Krishnapatnam plant in Andhra Pradesh is due to start in 2013.
The company was the lowest bidder for a similar-sized project at Tilaiya in the eastern state of Jharkhand, which is yet to be awarded by the federal Power Ministry. Each project may cost as much as 200 billion rupees, Chairman Ambani said Sept. 23.
Ultra Mega Projects
The three coal-fired plants are among the 12 so-called ultra mega power projects that the government is auctioning to help increase India’s generation capacity by 33 percent.
Reliance Power spent 26.86 billion rupees from the proceeds of last year’s share sale on the Sasan and Krishnapatnam plants and on other smaller projects as of Dec. 31, the company said in a Jan. 22 statement to the Bombay Stock Exchange.
“They will have to ensure that fund raising shouldn’t disturb project schedules,” said Mahesh Patil, who helps manage an equivalent of $8.8 billion at Birla Sunlife Asset Management in Mumbai.
Reliance Power’s 7,480-megawatt, gas-fired station at Dadri in Uttar Pradesh has been stalled because of a gas-supply dispute with Reliance Industries Ltd., India’s biggest company by market value, controlled by Anil Ambani’s estranged brother, Mukesh.
Gas Dispute
The dispute arose after the brothers split the Reliance group in 2005 following a family feud. Reliance Industries, an energy explorer and oil refiner, sought prices higher than contracted levels for gas to be sold to Reliance Natural Resources Ltd., which is controlled by Anil Ambani and procures fuel for his group’s power projects.
The Bombay High Court, which banned gas sales from Reliance Industries’ field in June 2007, temporarily lifted the restriction on Jan. 30. The fuel can now be supplied to customers other than Reliance Natural and state-owned NTPC Ltd.
Reliance Power raised $3 billion in India’s biggest share sale in February last year to help fund its $28 billion plan to build power plants. The company will install 28,200 megawatts, or 19 percent of India’s current capacity, in five years, according to proposals announced during the share sale.
The IPO attracted $189 billion of bids and shares were sold at as much as 450 rupees apiece. The stock fell as much as 21 percent on its Feb. 11 trading debut, prompting Reliance Power to give investors free shares to compensate them for the loss.
Investors got three free shares for every five held on May 30. The bonus issue reduced the cost of acquiring Reliance Power shares to 269 rupees for individual investors, 40 percent lower than the IPO price of 430 rupees. For large shareholders, who paid 450 rupees a share, the rate fell to 281 rupees a share.
No free shares were given to Ambani or the founder group. The stock closed at 103.25 rupees in Mumbai yesterday.
“The lead time for getting loans has increased,” Chief Executive Officer Jayarama Chalasani said by telephone in Mumbai.
The Mumbai-based company is 25 billion rupees short of the 145 billion rupees ($3 billion) it needs to borrow for its first 4,000 megawatt plant at Sasan in central India, Chalasani said in an interview. Reliance Power expects to raise funds for a similar plant at Krishnapatnam in the south by June, he said.
Reliance Power, controlled by billionaire Anil Ambani, sought to borrow $4 billion overseas for the projects by December and was forced to seek rupee loans instead after banks led by Standard Chartered Plc asked for more time to study proposals. A dispute over the supply of natural gas has stalled the utility’s largest plant in northern India and contributed to the 56 percent slump in its shares since they started trading a year earlier.
“The delay in raising funds may hurt Sasan’s completion schedule,” said Abhineet Anand, Mumbai-based analyst at Antique Broking Ltd. “The timing of raising funds is key to Sasan and other large Indian power projects.”
The company, which is yet to start producing power, has borrowed 120 billion rupees for Sasan from a group of 12 banks led by the State Bank of India and expects to get the rest by the end of this month, Chalasani said. Work on the plant in Madhya Pradesh state has already started to ensure that loan delays don’t affect the completion schedule, he said.
Overseas Loans
The rupee debt will be repaid when the company secures dollar-denominated loans from overseas banks, the CEO said. Reliance Power has appointed Standard Chartered as lead banker and China Development Bank Corp. for the overseas borrowings.
The overseas loan for Sasan was delayed because it is “the largest to be raised on a project-finance basis,” Chalasani said yesterday. “Banks, therefore, need more time to examine the expense side of the business including mining technology and capital and operating expenses. This is much more complicated and is completely different from financing any other power project.”
He declined to give a timeline for obtaining overseas loans.
The first phase of the Sasan project is scheduled to be completed by December 2011 and the second by March 2013. The Krishnapatnam plant in Andhra Pradesh is due to start in 2013.
The company was the lowest bidder for a similar-sized project at Tilaiya in the eastern state of Jharkhand, which is yet to be awarded by the federal Power Ministry. Each project may cost as much as 200 billion rupees, Chairman Ambani said Sept. 23.
Ultra Mega Projects
The three coal-fired plants are among the 12 so-called ultra mega power projects that the government is auctioning to help increase India’s generation capacity by 33 percent.
Reliance Power spent 26.86 billion rupees from the proceeds of last year’s share sale on the Sasan and Krishnapatnam plants and on other smaller projects as of Dec. 31, the company said in a Jan. 22 statement to the Bombay Stock Exchange.
“They will have to ensure that fund raising shouldn’t disturb project schedules,” said Mahesh Patil, who helps manage an equivalent of $8.8 billion at Birla Sunlife Asset Management in Mumbai.
Reliance Power’s 7,480-megawatt, gas-fired station at Dadri in Uttar Pradesh has been stalled because of a gas-supply dispute with Reliance Industries Ltd., India’s biggest company by market value, controlled by Anil Ambani’s estranged brother, Mukesh.
Gas Dispute
The dispute arose after the brothers split the Reliance group in 2005 following a family feud. Reliance Industries, an energy explorer and oil refiner, sought prices higher than contracted levels for gas to be sold to Reliance Natural Resources Ltd., which is controlled by Anil Ambani and procures fuel for his group’s power projects.
The Bombay High Court, which banned gas sales from Reliance Industries’ field in June 2007, temporarily lifted the restriction on Jan. 30. The fuel can now be supplied to customers other than Reliance Natural and state-owned NTPC Ltd.
Reliance Power raised $3 billion in India’s biggest share sale in February last year to help fund its $28 billion plan to build power plants. The company will install 28,200 megawatts, or 19 percent of India’s current capacity, in five years, according to proposals announced during the share sale.
The IPO attracted $189 billion of bids and shares were sold at as much as 450 rupees apiece. The stock fell as much as 21 percent on its Feb. 11 trading debut, prompting Reliance Power to give investors free shares to compensate them for the loss.
Investors got three free shares for every five held on May 30. The bonus issue reduced the cost of acquiring Reliance Power shares to 269 rupees for individual investors, 40 percent lower than the IPO price of 430 rupees. For large shareholders, who paid 450 rupees a share, the rate fell to 281 rupees a share.
No free shares were given to Ambani or the founder group. The stock closed at 103.25 rupees in Mumbai yesterday.
Monday, February 9, 2009
Geithner Seeks Private Investment for Toxic Assets
Feb. 9 (Bloomberg) -- Treasury Secretary Timothy Geithner is seeking to draw investors into the U.S. financial-rescue program, aiming to add private funding as a new component of proposals to address the toxic debt clogging banks’ balance sheets.
Aides worked through the weekend to complete the package that Geithner will announce tomorrow in Washington, which was delayed by a day. Aspects of the plan that have been settled include a new round of injections of taxpayer funds into banks, targeted at those identified by regulators as most in need of new capital, people briefed on the matter said.
The toughest issue has been the one Geithner’s predecessor failed to address: the illiquid assets that caused the credit crunch. A leading proposal is a so-called aggregator bank, featuring investors such as hedge funds and private equity, that may issue Federal Deposit Insurance Corp.-backed debt, the people said. It’s unclear how big a role there will be for guarantees of securities that stay on banks’ balance sheets.
“We have to reach a point where investors and consumers have greater confidence in our financial system,” Philadelphia Federal Reserve Bank President Charles Plosser said in an interview. “Without that, these institutions will not be able to attract new capital or be able to fully resume their important role in providing credit.”
Congressional Briefing
Treasury officials told congressional staff late today that the plan for an aggregator bank would have an initial capacity of as much as $500 billion, according to one Democratic and one Republican congressional aide. A second component will be $50 billion to help stem foreclosures, they said.
A Treasury spokeswoman wasn’t immediately available for comment on the numbers.
Officials said yesterday the one-day delay for Geithner’ speech was to allow the administration to focus on getting Senate approval of President Barack Obama’s fiscal stimulus. Geithner is scheduled to unveil the effort at 11 a.m. tomorrow.
A Federal Reserve program designed to spur consumer and small-business loans will be expanded as part of tomorrow’s package, possibly to include real-estate assets, the people said.
For now, the government doesn’t intend to ask for more money, while leaving open the option of requesting more later. Most of the second half of the $700 billion Troubled Asset Relief Program has yet to be allocated, an amount that economists have said is unequal to the task of shoring up the financial industry.
‘Not Working’
“Credit markets in this country are not working right” and “we’ll do what is necessary” to start a process of repair, Lawrence Summers, director of the White House National Economic Council, said on ABC television’s This Week program yesterday. Asked if the administration may come back to ask for more money down the road he said “we’ll see what happens.”
Regulators plan to subject banks deemed most important to the financial system’s stability to a new test to determine whether they have enough capital, according to a person familiar with the matter. The President’s Working Group on financial markets, which includes the Fed, FDIC, Securities and Exchange Commission and Commodity Futures Trading Commission, will develop the examination’s guidelines, the person said.
Firms that fail the test will receive more capital injections from the government, the person said. Banks that couldn’t repay the money over a period of time could be liquidated, placed into receivership or have their assets retired by officials over time.
Sales Effort
Geithner will try to sell the plan as a clean break from the Bush administration, while offering many of the same programs and policy tools bequeathed by former Secretary Henry Paulson.
The round of equity injections planned will contrast with Paulson’s initial push to make new capital available to all banks, and the firms that get additional money will be faced with tougher terms, people briefed on the matter said.
“We’ve got to characterize this not as saving the banks, but saving the economy in terms of the credit that flows in this country,” Senator Claire McCaskill, a Missouri Democrat, said yesterday on NBC’s Meet the Press.
The FDIC is expected to play a role either running or financing some bad bank type of unit that takes on illiquid securities, which may sell its own government-backed debt, the people said.
FDIC Credit Line
Also this week, officials may seek to boost the FDIC’s credit line with the Treasury to $100 billion from $30 billion. The FDIC’S deposit-insurance fund is diminishing as it takes on more failed banks.
Geithner’s plan may include an asset-guarantee element similar to previous deals arranged for Citigroup Inc. and Bank of America Corp., while it’s not clear how big a role such insurance would play in tomorrow’s announcement, the people said.
The new approach comes four months after the start of the $700 billion TARP, which both Democrats and Republicans have criticized as ineffective. The task Geithner faces is reviving a U.S. banking system throttled by $752 billion in credit losses and an economy that lost almost 600,000 jobs last month.
Economic news this week is expected to show a further deterioration. Sales at U.S. retailers probably fell in January for a seventh straight month, capping the longest slide since comparable records began in 1992. The Commerce Department report will probably show purchases declined 0.8 percent, according to the median estimate in a Bloomberg News survey.
Economy Deteriorates
A Labor Department report last week showed the U.S. unemployment rate climbed to 7.6 percent, its highest level since 1992. White House Council of Economic Advisers Chairman Christina Romer warned last week that the rate may climb to 10 percent or higher without approval of Obama’s stimulus package, which exceeds $800 billion.
With the economic downturn deepening, attracting private money to the financial industry may be difficult. The Standard and Poor’s 500 Banks Index has fallen 33 percent since the start of last month, and 65 percent in the past year. It rose today, closing at 91.20.
Bank of America plunged 57 percent in the past month, closing at $6.58 last week even after the government agreed to backstop a portfolio of more than $100 billion of its assets. Citigroup, which got a joint federal guarantee for investments in excess of $300 billion, closed at $3.91.
The Obama administration will seek to “catalyze and spur private investment” to help solve the crisis, Summers said in an interview on Fox News Sunday.
‘Looking for Clarity’
Banks are “looking for clarity, we’re looking for this to be the complete package,” said Wayne Abernathy, an executive vice president at the American Bankers Association in Washington. “If they don’t have the details spelled out they will just freeze the market.”
Housing programs will be a key element of the administration’s plan, though may be announced separately from the bank-rescue rollout. House Financial Services Committee Chairman Barney Frank said yesterday that Obama will steer “substantial” funds to stem foreclosures as the administration prepares to unveil its plan for stabilizing the economy.
“A major part of what you’re going to see from the Obama administration is an effort to put substantial money into reducing foreclosures,” Frank, a Massachusetts Democrat, said on NBC’s “Meet the Press.”
Aides worked through the weekend to complete the package that Geithner will announce tomorrow in Washington, which was delayed by a day. Aspects of the plan that have been settled include a new round of injections of taxpayer funds into banks, targeted at those identified by regulators as most in need of new capital, people briefed on the matter said.
The toughest issue has been the one Geithner’s predecessor failed to address: the illiquid assets that caused the credit crunch. A leading proposal is a so-called aggregator bank, featuring investors such as hedge funds and private equity, that may issue Federal Deposit Insurance Corp.-backed debt, the people said. It’s unclear how big a role there will be for guarantees of securities that stay on banks’ balance sheets.
“We have to reach a point where investors and consumers have greater confidence in our financial system,” Philadelphia Federal Reserve Bank President Charles Plosser said in an interview. “Without that, these institutions will not be able to attract new capital or be able to fully resume their important role in providing credit.”
Congressional Briefing
Treasury officials told congressional staff late today that the plan for an aggregator bank would have an initial capacity of as much as $500 billion, according to one Democratic and one Republican congressional aide. A second component will be $50 billion to help stem foreclosures, they said.
A Treasury spokeswoman wasn’t immediately available for comment on the numbers.
Officials said yesterday the one-day delay for Geithner’ speech was to allow the administration to focus on getting Senate approval of President Barack Obama’s fiscal stimulus. Geithner is scheduled to unveil the effort at 11 a.m. tomorrow.
A Federal Reserve program designed to spur consumer and small-business loans will be expanded as part of tomorrow’s package, possibly to include real-estate assets, the people said.
For now, the government doesn’t intend to ask for more money, while leaving open the option of requesting more later. Most of the second half of the $700 billion Troubled Asset Relief Program has yet to be allocated, an amount that economists have said is unequal to the task of shoring up the financial industry.
‘Not Working’
“Credit markets in this country are not working right” and “we’ll do what is necessary” to start a process of repair, Lawrence Summers, director of the White House National Economic Council, said on ABC television’s This Week program yesterday. Asked if the administration may come back to ask for more money down the road he said “we’ll see what happens.”
Regulators plan to subject banks deemed most important to the financial system’s stability to a new test to determine whether they have enough capital, according to a person familiar with the matter. The President’s Working Group on financial markets, which includes the Fed, FDIC, Securities and Exchange Commission and Commodity Futures Trading Commission, will develop the examination’s guidelines, the person said.
Firms that fail the test will receive more capital injections from the government, the person said. Banks that couldn’t repay the money over a period of time could be liquidated, placed into receivership or have their assets retired by officials over time.
Sales Effort
Geithner will try to sell the plan as a clean break from the Bush administration, while offering many of the same programs and policy tools bequeathed by former Secretary Henry Paulson.
The round of equity injections planned will contrast with Paulson’s initial push to make new capital available to all banks, and the firms that get additional money will be faced with tougher terms, people briefed on the matter said.
“We’ve got to characterize this not as saving the banks, but saving the economy in terms of the credit that flows in this country,” Senator Claire McCaskill, a Missouri Democrat, said yesterday on NBC’s Meet the Press.
The FDIC is expected to play a role either running or financing some bad bank type of unit that takes on illiquid securities, which may sell its own government-backed debt, the people said.
FDIC Credit Line
Also this week, officials may seek to boost the FDIC’s credit line with the Treasury to $100 billion from $30 billion. The FDIC’S deposit-insurance fund is diminishing as it takes on more failed banks.
Geithner’s plan may include an asset-guarantee element similar to previous deals arranged for Citigroup Inc. and Bank of America Corp., while it’s not clear how big a role such insurance would play in tomorrow’s announcement, the people said.
The new approach comes four months after the start of the $700 billion TARP, which both Democrats and Republicans have criticized as ineffective. The task Geithner faces is reviving a U.S. banking system throttled by $752 billion in credit losses and an economy that lost almost 600,000 jobs last month.
Economic news this week is expected to show a further deterioration. Sales at U.S. retailers probably fell in January for a seventh straight month, capping the longest slide since comparable records began in 1992. The Commerce Department report will probably show purchases declined 0.8 percent, according to the median estimate in a Bloomberg News survey.
Economy Deteriorates
A Labor Department report last week showed the U.S. unemployment rate climbed to 7.6 percent, its highest level since 1992. White House Council of Economic Advisers Chairman Christina Romer warned last week that the rate may climb to 10 percent or higher without approval of Obama’s stimulus package, which exceeds $800 billion.
With the economic downturn deepening, attracting private money to the financial industry may be difficult. The Standard and Poor’s 500 Banks Index has fallen 33 percent since the start of last month, and 65 percent in the past year. It rose today, closing at 91.20.
Bank of America plunged 57 percent in the past month, closing at $6.58 last week even after the government agreed to backstop a portfolio of more than $100 billion of its assets. Citigroup, which got a joint federal guarantee for investments in excess of $300 billion, closed at $3.91.
The Obama administration will seek to “catalyze and spur private investment” to help solve the crisis, Summers said in an interview on Fox News Sunday.
‘Looking for Clarity’
Banks are “looking for clarity, we’re looking for this to be the complete package,” said Wayne Abernathy, an executive vice president at the American Bankers Association in Washington. “If they don’t have the details spelled out they will just freeze the market.”
Housing programs will be a key element of the administration’s plan, though may be announced separately from the bank-rescue rollout. House Financial Services Committee Chairman Barney Frank said yesterday that Obama will steer “substantial” funds to stem foreclosures as the administration prepares to unveil its plan for stabilizing the economy.
“A major part of what you’re going to see from the Obama administration is an effort to put substantial money into reducing foreclosures,” Frank, a Massachusetts Democrat, said on NBC’s “Meet the Press.”
Australian, New Zealand Dollars Decline From One-Month High
Feb. 10 (Bloomberg) -- The Australian and New Zealand dollars fell from near a one-month high after a report said Russian businesses may seek to reschedule loans and Australia’s business confidence dropped to a record low.
Australia’s currency slid as a sentiment index declined 12 points to minus 32, the lowest since the series began in 1989, according to a National Australia Bank Ltd. survey of more than 400 companies. Russian banks and businesses may ask foreign banks to reschedule loans worth $400 billion, the Nikkei newspaper reported from Moscow, citing an interview with Anatoly Aksakov, the head of the Russian Association of Regional Banks.
“It’s certainly suggesting that all is not well from a risk perspective and the Aussie dollar is leveraged to the global growth and risk cycle,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “We’ve also seen pretty bad domestic data with the NAB business conditions and confidence survey showing record lows.”
Australia’s currency fell 0.5 percent to 66.89 U.S. cents as of 12:16 p.m. in Sydney from 67.21 cents late in Asia yesterday. It earlier strengthened to as much as 68.49 cents, the highest since Jan. 13. The currency slid 0.9 percent to 60.96 yen. The currency will find so-called support at 66.80 and then 66.40 U.S. cents, Trinh said.
New Zealand’s dollar slumped 0.2 percent to 53.11 U.S. cents from 53.24 in Asia yesterday. The so-called kiwi rose as high as 54.47 cents, the strongest since Jan. 20. It bought 48.41 yen from 48.72.
Obama Demands
The currencies earlier rose on speculation U.S. Treasury Secretary Timothy Geithner will announce a financial rescue plan in Washington today, spurring demand for higher-yielding assets.
U.S. President Barack Obama is demanding a stimulus bill on his desk before Congress leaves for the Presidents’ Day holiday on Feb. 16.
Benchmark interest rates are 3.25 percent in Australia and 3.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Australian government bonds were little changed with the yield on the 10-year note at 4.36 percent, according to data compiled by Bloomberg.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.46 percent from 3.49 yesterday.
Australia’s currency slid as a sentiment index declined 12 points to minus 32, the lowest since the series began in 1989, according to a National Australia Bank Ltd. survey of more than 400 companies. Russian banks and businesses may ask foreign banks to reschedule loans worth $400 billion, the Nikkei newspaper reported from Moscow, citing an interview with Anatoly Aksakov, the head of the Russian Association of Regional Banks.
“It’s certainly suggesting that all is not well from a risk perspective and the Aussie dollar is leveraged to the global growth and risk cycle,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “We’ve also seen pretty bad domestic data with the NAB business conditions and confidence survey showing record lows.”
Australia’s currency fell 0.5 percent to 66.89 U.S. cents as of 12:16 p.m. in Sydney from 67.21 cents late in Asia yesterday. It earlier strengthened to as much as 68.49 cents, the highest since Jan. 13. The currency slid 0.9 percent to 60.96 yen. The currency will find so-called support at 66.80 and then 66.40 U.S. cents, Trinh said.
New Zealand’s dollar slumped 0.2 percent to 53.11 U.S. cents from 53.24 in Asia yesterday. The so-called kiwi rose as high as 54.47 cents, the strongest since Jan. 20. It bought 48.41 yen from 48.72.
Obama Demands
The currencies earlier rose on speculation U.S. Treasury Secretary Timothy Geithner will announce a financial rescue plan in Washington today, spurring demand for higher-yielding assets.
U.S. President Barack Obama is demanding a stimulus bill on his desk before Congress leaves for the Presidents’ Day holiday on Feb. 16.
Benchmark interest rates are 3.25 percent in Australia and 3.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Australian government bonds were little changed with the yield on the 10-year note at 4.36 percent, according to data compiled by Bloomberg.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.46 percent from 3.49 yesterday.
Australian Business Sentiment Plunges to Record Low
By Jacob Greber
Feb. 10 (Bloomberg) -- Australian business confidence tumbled in January to a record low as global demand for exports wanes, adding to signs the economy will fall into its first recession in almost two decades.
The sentiment index dropped 12 points to minus 32, the lowest level since the series began in 1989, according to a National Australia Bank Ltd. survey of more than 400 companies conducted from Jan. 28 to Feb. 3 and released in Sydney today. A negative reading means pessimists outnumber optimists.
Most companies were surveyed before the government announced plans last week to spend A$42 billion ($28 billion) on infrastructure and cash handouts to families, doubling its rescue package to cushion the economy from declining export income. To stoke business and consumer confidence, the central bank has cut the benchmark interest rate by four percentage points since early September to a 45-year low of 3.25 percent.
“Unfortunately, there are strong indicators in the survey to again point to further falls ahead,” said Alan Oster, chief economist at National Australia in Melbourne.
“While much of the downturn to date has been driven out of the domestic economy, the survey is increasingly showing signs of the impact of global forces.”
The Australian dollar fell to 67.09 U.S. cents at 11:36 a.m. in Sydney from 67.26 cents just before the report was released. The two-year government bond yield declined 2 basis points to 2.80 percent. A basis point is 0.01 percentage point.
Jobless Rate
Companies including BHP Billiton Ltd., the world’s biggest miner, and investment bank Macquarie Group Ltd. are firing workers after the economy grew at its slowest pace in eight years in the third quarter.
The government expects the jobless rate will rise to 7 percent in 2010 from its current two-year high of 4.5 percent. A report published yesterday showed advertisements for job vacancies fell in January for a ninth straight month.
Australia’s trade surplus shrank by almost half in December as coal and metal exports tumbled, a report showed on Feb. 3.
Today’s survey suggests the government’s first stimulus package, announced in October and which included A$10.4 billion in grants to families, pensioners and first-home buyers, “provided only temporary relief and the situation domestically continues to fundamentally deteriorate,” Oster said.
Interest Rates
The Reserve Bank, which cut its benchmark rate on Feb. 3 for the fifth time since September, will need to reduce borrowing costs by three quarters of a percentage point to 2.5 percent next month, Oster said.
“The recent collapse in confidence and the deteriorating global and commodity price outlook has seen a marked paring back in investment intentions for coming months,” he said.
The business confidence index recorded a 13th straight reading of less than zero in January, which indicates companies expecting their industry will deteriorate outnumber those seeing an improvement.
The business conditions gauge, a measure of hiring, sales and profits, fell 5 points to minus 11.
“It is concerning that businesses continue to report forward orders at levels last seen in late 1991,” Oster said.
Australia’s economy will probably shrink 0.25 percent in 2009 before expanding around 1 percent in 2010, according to today’s National Bank report.
“It needs to be stressed that we see no fast recovery in Australian activity,” with a rebound unlikely to get under way until next year, Oster said.
Feb. 10 (Bloomberg) -- Australian business confidence tumbled in January to a record low as global demand for exports wanes, adding to signs the economy will fall into its first recession in almost two decades.
The sentiment index dropped 12 points to minus 32, the lowest level since the series began in 1989, according to a National Australia Bank Ltd. survey of more than 400 companies conducted from Jan. 28 to Feb. 3 and released in Sydney today. A negative reading means pessimists outnumber optimists.
Most companies were surveyed before the government announced plans last week to spend A$42 billion ($28 billion) on infrastructure and cash handouts to families, doubling its rescue package to cushion the economy from declining export income. To stoke business and consumer confidence, the central bank has cut the benchmark interest rate by four percentage points since early September to a 45-year low of 3.25 percent.
“Unfortunately, there are strong indicators in the survey to again point to further falls ahead,” said Alan Oster, chief economist at National Australia in Melbourne.
“While much of the downturn to date has been driven out of the domestic economy, the survey is increasingly showing signs of the impact of global forces.”
The Australian dollar fell to 67.09 U.S. cents at 11:36 a.m. in Sydney from 67.26 cents just before the report was released. The two-year government bond yield declined 2 basis points to 2.80 percent. A basis point is 0.01 percentage point.
Jobless Rate
Companies including BHP Billiton Ltd., the world’s biggest miner, and investment bank Macquarie Group Ltd. are firing workers after the economy grew at its slowest pace in eight years in the third quarter.
The government expects the jobless rate will rise to 7 percent in 2010 from its current two-year high of 4.5 percent. A report published yesterday showed advertisements for job vacancies fell in January for a ninth straight month.
Australia’s trade surplus shrank by almost half in December as coal and metal exports tumbled, a report showed on Feb. 3.
Today’s survey suggests the government’s first stimulus package, announced in October and which included A$10.4 billion in grants to families, pensioners and first-home buyers, “provided only temporary relief and the situation domestically continues to fundamentally deteriorate,” Oster said.
Interest Rates
The Reserve Bank, which cut its benchmark rate on Feb. 3 for the fifth time since September, will need to reduce borrowing costs by three quarters of a percentage point to 2.5 percent next month, Oster said.
“The recent collapse in confidence and the deteriorating global and commodity price outlook has seen a marked paring back in investment intentions for coming months,” he said.
The business confidence index recorded a 13th straight reading of less than zero in January, which indicates companies expecting their industry will deteriorate outnumber those seeing an improvement.
The business conditions gauge, a measure of hiring, sales and profits, fell 5 points to minus 11.
“It is concerning that businesses continue to report forward orders at levels last seen in late 1991,” Oster said.
Australia’s economy will probably shrink 0.25 percent in 2009 before expanding around 1 percent in 2010, according to today’s National Bank report.
“It needs to be stressed that we see no fast recovery in Australian activity,” with a rebound unlikely to get under way until next year, Oster said.
Asian Material, Consumer Stocks Fall on Obama ‘Crisis’ Comments
Feb. 10 (Bloomberg) -- Asian material and consumer stocks fell after President Barack Obama said the U.S. faces a “full- blown crisis.” Utility companies gained as oil traded near a three-week low.
BHP Billiton Ltd., the world’s biggest mining company, dropped 0.4 percent in Sydney. Tohoku Electric Power Co. advanced 1.2 percent in Tokyo, pacing gains among utility stocks, on speculation fuel costs will drop. Nissan Motor Co., Japan’s third-largest carmaker, jumped 7.3 percent after saying it will cut 20,000 jobs.
“It’s going to take a lot of money and a lot of time for the U.S. economy to emerge from these depression-like conditions,” said Ben Pedley, Hong Kong-based managing director of LGT Investment Management Ltd., whose parent manages more than $18 billion. “It’s certainly going to help the companies if they cut costs but it’s not going to do anything to affect demand for their products.”
About five stocks rose for every four that fell on the MSCI Asia Pacific Index, which was little changed at 83.29 at 12:08 a.m. in Tokyo. The gauge has fallen 7 percent this year, extending 2008’s record 43 percent decline as the world’s biggest economies sank into recession.
Japan’s Nikkei 225 Stock Average added 0.2 percent to 7,984.54. Australia’s S&P/ASX 200 Index slipped 0.9 percent. China’s Shanghai Composite Index gained 0.9 percent.
IOOF Holdings Ltd. and Australian Wealth Management Ltd., asset managers that agreed to merge last year, slumped more than 5 percent after saying funds under management plunged. Orix Corp., Japan’s biggest non-bank financial company, plunged 10 percent after slashing its profit forecast.
Policy Action
Futures on the Standard & Poor’s 500 Index dropped 0.7 percent after Obama’s comments, which were made at a news conference just hours after the Senate held a procedural vote that cleared the way for passage of its stimulus bill tomorrow. The S&P 500 added 0.2 percent yesterday.
Governments around the world are stepping up efforts to ease the crisis that the International Monetary Fund predicts will cause global growth to almost grind to a halt this year. The U.S. needs government action now to put people back to work, Obama said.
“The announcement of the U.S. financial plan is the biggest event,” Mamoru Shimode, Tokyo-based equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.
Stock declines in the past year have dragged the average valuation of companies on the MSCI Asia Pacific Index down by 13 percent to 13 times reported profit, as more signs emerged the global financial crisis was hurting corporate earnings.
BHP Billiton Ltd., the world’s biggest mining company, dropped 0.4 percent in Sydney. Tohoku Electric Power Co. advanced 1.2 percent in Tokyo, pacing gains among utility stocks, on speculation fuel costs will drop. Nissan Motor Co., Japan’s third-largest carmaker, jumped 7.3 percent after saying it will cut 20,000 jobs.
“It’s going to take a lot of money and a lot of time for the U.S. economy to emerge from these depression-like conditions,” said Ben Pedley, Hong Kong-based managing director of LGT Investment Management Ltd., whose parent manages more than $18 billion. “It’s certainly going to help the companies if they cut costs but it’s not going to do anything to affect demand for their products.”
About five stocks rose for every four that fell on the MSCI Asia Pacific Index, which was little changed at 83.29 at 12:08 a.m. in Tokyo. The gauge has fallen 7 percent this year, extending 2008’s record 43 percent decline as the world’s biggest economies sank into recession.
Japan’s Nikkei 225 Stock Average added 0.2 percent to 7,984.54. Australia’s S&P/ASX 200 Index slipped 0.9 percent. China’s Shanghai Composite Index gained 0.9 percent.
IOOF Holdings Ltd. and Australian Wealth Management Ltd., asset managers that agreed to merge last year, slumped more than 5 percent after saying funds under management plunged. Orix Corp., Japan’s biggest non-bank financial company, plunged 10 percent after slashing its profit forecast.
Policy Action
Futures on the Standard & Poor’s 500 Index dropped 0.7 percent after Obama’s comments, which were made at a news conference just hours after the Senate held a procedural vote that cleared the way for passage of its stimulus bill tomorrow. The S&P 500 added 0.2 percent yesterday.
Governments around the world are stepping up efforts to ease the crisis that the International Monetary Fund predicts will cause global growth to almost grind to a halt this year. The U.S. needs government action now to put people back to work, Obama said.
“The announcement of the U.S. financial plan is the biggest event,” Mamoru Shimode, Tokyo-based equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.
Stock declines in the past year have dragged the average valuation of companies on the MSCI Asia Pacific Index down by 13 percent to 13 times reported profit, as more signs emerged the global financial crisis was hurting corporate earnings.
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