Nov. 15 (Bloomberg) -- AMP Ltd., Australia’s biggest provider of pension plans, has entered into a partnership with China Life Insurance Co. to cooperate in areas including asset management and pensions.
The agreement with China’s biggest insurer offers significant potential for AMP to expand its business in the world’s fastest-growing economy, Craig Dunn, chief executive officer of Sydney-based AMP, said in an e-mailed statement.
AMP last week proposed a plan to buy the Australian and New Zealand units of Axa Asia Pacific Holdings Ltd. as it seeks to expand its business in the Asia Pacific region. Partnering China Life will increase its presence in a private pensions market forecast to grow to A$1 trillion ($933 billion) by 2030 as the population ages, it said.
“The partnership sets a strong foundation for both organizations to cooperate on opportunities in China, Australia and the Asia Pacific region,” Dunn said.
The Chinese pension market is undergoing a period of structural change as authorities open up more investment opportunities for pension funds, Dunn said. By 2050, the number of Chinese citizens 60 or older is projected to rise to more than 430 million, or 31 percent of the population, he said.
Saturday, November 14, 2009
Australia Offers to Exempt Farming From Carbon Plan
Nov. 15 (Bloomberg) -- Australia’s government has offered to exempt agriculture from the nation’s carbon-reduction system in an effort to get political support, Climate Change Minister Penny Wong said.
“We are serious about getting this legislation through,” Wong said in a television interview with the Australian Broadcasting Corp. today. “This is an offer that is made by the government on an issue that we know is important to the opposition.”
Prime Minister Kevin Rudd’s Labor Party government wants lawmakers to vote on the legislation by the end of this month as part of a push for carbon trading to start in 2011. Opposition Liberal Party leader Malcolm Turnbull proposed a number of changes last month, including permanently excluding farming emissions and compensation for affected businesses.
The government has said it will consider changes that are economically responsible and environmentally effective, and is prepared to talk more with the opposition.
The Australian government has called for a A$10 ($9.30) a metric ton carbon price lasting a year until July 2012, from when the market will start determining the cost. Rudd’s Labor Party wants to reduce greenhouse gases by between 5 percent and 15 percent from their 2000 levels within 10 years.
Australian upper-house lawmakers defeated the government’s proposed carbon legislation on Aug. 13. A second rejection at the senate this month would give Rudd a trigger to call an early election.
‘Massive Tax’
Barnaby Joyce, senate leader of the opposition National Party, said the exemption of farming doesn’t alter his stance on the carbon plan. The Nationals are in a coalition with Turnbull’s Liberal Party.
“Now we have a ridiculous, massive tax that exempts part of agriculture but is still not going to change the temperature of the globe,” Joyce told Sky News Australia. “It is merely a gesture.”
Joyce wants the government to delay its legislation until after about 190 nations gather in Copenhagen in December for a final round of negotiations on a climate agreement to replace the Kyoto Protocol expiring in 2012.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Last Updated: November 14, 2009 21:57 EST
“We are serious about getting this legislation through,” Wong said in a television interview with the Australian Broadcasting Corp. today. “This is an offer that is made by the government on an issue that we know is important to the opposition.”
Prime Minister Kevin Rudd’s Labor Party government wants lawmakers to vote on the legislation by the end of this month as part of a push for carbon trading to start in 2011. Opposition Liberal Party leader Malcolm Turnbull proposed a number of changes last month, including permanently excluding farming emissions and compensation for affected businesses.
The government has said it will consider changes that are economically responsible and environmentally effective, and is prepared to talk more with the opposition.
The Australian government has called for a A$10 ($9.30) a metric ton carbon price lasting a year until July 2012, from when the market will start determining the cost. Rudd’s Labor Party wants to reduce greenhouse gases by between 5 percent and 15 percent from their 2000 levels within 10 years.
Australian upper-house lawmakers defeated the government’s proposed carbon legislation on Aug. 13. A second rejection at the senate this month would give Rudd a trigger to call an early election.
‘Massive Tax’
Barnaby Joyce, senate leader of the opposition National Party, said the exemption of farming doesn’t alter his stance on the carbon plan. The Nationals are in a coalition with Turnbull’s Liberal Party.
“Now we have a ridiculous, massive tax that exempts part of agriculture but is still not going to change the temperature of the globe,” Joyce told Sky News Australia. “It is merely a gesture.”
Joyce wants the government to delay its legislation until after about 190 nations gather in Copenhagen in December for a final round of negotiations on a climate agreement to replace the Kyoto Protocol expiring in 2012.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Last Updated: November 14, 2009 21:57 EST
Friday, November 13, 2009
American Air’s Oneworld Partners Craft Incentives for Japan Air
Nov. 14 (Bloomberg) -- American Airlines’ partners in Oneworld, the industry alliance that includes British Airways Plc, are devising incentives to help keep Japan Airlines Corp. in the group.
Each carrier is crafting its own offer, which will then be sent to Japan Air and the Japanese government as one proposal, Oneworld managing partner John McCulloch said in an interview yesterday. JAL, as the airline is known, is also awaiting approval of a government bailout.
“There is a concerted, coordinated effort by the Oneworld carriers to put together a package of incentives,” McCulloch said. “The package is very much an effort to persuade them to stay.”
The sweeteners would bolster efforts by American to ensure Japan Air stays in Oneworld as Delta Air Lines Inc. tries to lure the money-losing carrier to the SkyTeam alliance. American said this week that private-equity firm TPG Inc. was prepared to team up on a possible investment in Japan Air.
Oneworld’s proposal “is not specific to a capital infusion, although there is an element of that,” McCulloch said in a telephone interview from Vancouver. He didn’t give specifics.
Delta and American, the world’s two largest airlines, are vying for access to Tokyo-based Japan Air’s route network in its home country and in China, Asia’s biggest air-traffic market.
Taking a Stake
AMR Corp.’s American is the only Oneworld member proposing to pump money into Japan Air, which is seeking $1.4 billion in government loans to keep flying. American and TPG are studying a $300 million investment, a person familiar with the talks has said. Delta also has held talks with Japan Air about an investment, a person familiar with those discussions has said.
Staying in Oneworld would “make more sense,” and it would be “easy” to seek antitrust immunity to deepen ties with American, Japan Air President Haruka Nishimatsu said yesterday in Tokyo. The airlines established a marketing alliance in 1999, and JAL joined Oneworld two years ago.
That history may work in American’s favor when JAL makes a decision.
“It’s the most likely outcome that JAL would stay with Oneworld,” Jim Corridore, a Standard & Poor’s equity analyst in New York, said in an interview. “It would take a concerted and convincing effort by Delta to move JAL out of Oneworld.”
A spokeswoman for Atlanta-based Delta, Betsy Talton, declined to comment on Nishimatsu’s remarks.
AMR’s View
“A JAL decision to remain in Oneworld is key to JAL’s successful recovery plan,” said Charley Wilson, a spokesman for Fort Worth, Texas-based AMR. “It gives JAL greater ability to build a strong, competitive and successful business for the long term.”
AMR rose 9 cents, or 1.6 percent, to $5.82 yesterday in New York Stock Exchange composite trading, while Delta was unchanged at $7.80.
British Airways “and other Oneworld carriers are investigating ways we can offer” support to JAL, said Cathy West, a spokeswoman for the London-based airline. Scott Mowrer, senior vice president for North America for Hong Kong-based Cathay Pacific Ltd., said he had no immediate comment.
Qantas Airways Ltd., Australia’s biggest airline, said Nov. 11 it may advise Japan Airlines on establishing a low-cost carrier as part of the lobbying effort. Qantas doesn’t plan a financial contribution, Chief Executive Officer Alan Joyce said.
The other Oneworld members are Finland’s Finnair Oyj, Hungary’s Malev Zrt., Chile’s Lan Airlines SA, Spain’s Iberia Lineas Aer de Espana, Grupo Mexicana de Aviacion SA and Royal Jordanian Airlines. British Airways and Iberia announced plans this week for a merger.
Each carrier is crafting its own offer, which will then be sent to Japan Air and the Japanese government as one proposal, Oneworld managing partner John McCulloch said in an interview yesterday. JAL, as the airline is known, is also awaiting approval of a government bailout.
“There is a concerted, coordinated effort by the Oneworld carriers to put together a package of incentives,” McCulloch said. “The package is very much an effort to persuade them to stay.”
The sweeteners would bolster efforts by American to ensure Japan Air stays in Oneworld as Delta Air Lines Inc. tries to lure the money-losing carrier to the SkyTeam alliance. American said this week that private-equity firm TPG Inc. was prepared to team up on a possible investment in Japan Air.
Oneworld’s proposal “is not specific to a capital infusion, although there is an element of that,” McCulloch said in a telephone interview from Vancouver. He didn’t give specifics.
Delta and American, the world’s two largest airlines, are vying for access to Tokyo-based Japan Air’s route network in its home country and in China, Asia’s biggest air-traffic market.
Taking a Stake
AMR Corp.’s American is the only Oneworld member proposing to pump money into Japan Air, which is seeking $1.4 billion in government loans to keep flying. American and TPG are studying a $300 million investment, a person familiar with the talks has said. Delta also has held talks with Japan Air about an investment, a person familiar with those discussions has said.
Staying in Oneworld would “make more sense,” and it would be “easy” to seek antitrust immunity to deepen ties with American, Japan Air President Haruka Nishimatsu said yesterday in Tokyo. The airlines established a marketing alliance in 1999, and JAL joined Oneworld two years ago.
That history may work in American’s favor when JAL makes a decision.
“It’s the most likely outcome that JAL would stay with Oneworld,” Jim Corridore, a Standard & Poor’s equity analyst in New York, said in an interview. “It would take a concerted and convincing effort by Delta to move JAL out of Oneworld.”
A spokeswoman for Atlanta-based Delta, Betsy Talton, declined to comment on Nishimatsu’s remarks.
AMR’s View
“A JAL decision to remain in Oneworld is key to JAL’s successful recovery plan,” said Charley Wilson, a spokesman for Fort Worth, Texas-based AMR. “It gives JAL greater ability to build a strong, competitive and successful business for the long term.”
AMR rose 9 cents, or 1.6 percent, to $5.82 yesterday in New York Stock Exchange composite trading, while Delta was unchanged at $7.80.
British Airways “and other Oneworld carriers are investigating ways we can offer” support to JAL, said Cathy West, a spokeswoman for the London-based airline. Scott Mowrer, senior vice president for North America for Hong Kong-based Cathay Pacific Ltd., said he had no immediate comment.
Qantas Airways Ltd., Australia’s biggest airline, said Nov. 11 it may advise Japan Airlines on establishing a low-cost carrier as part of the lobbying effort. Qantas doesn’t plan a financial contribution, Chief Executive Officer Alan Joyce said.
The other Oneworld members are Finland’s Finnair Oyj, Hungary’s Malev Zrt., Chile’s Lan Airlines SA, Spain’s Iberia Lineas Aer de Espana, Grupo Mexicana de Aviacion SA and Royal Jordanian Airlines. British Airways and Iberia announced plans this week for a merger.
Obama Says U.S. Seeking Broader Engagement With Asia
Nov. 14 (Bloomberg) -- President Barack Obama promised broader U.S. engagement with Asia and an expanded focus beyond the traditional economic powers such as Japan and China.
“We look to rising powers with the view that in the 21st century, the national security and economic growth of one country need not come at the expense of another,” Obama said in an address to an audience of Japanese business and political leaders in Tokyo’s Suntory Hall.
Setting out on his first trip to Asia as president, Obama is using today’s speech to outline his administration’s approach to the region, which includes greater engagement on economic and security issues.
Obama called for unified efforts to block North Korea’s nuclear weapons development and stressed the importance of increasing U.S. exports to achieve greater balance with countries that sell far more goods to the U.S. than they buy from American companies.
The world financial crisis will lead to a rebalancing for the U.S. economy, which will mean “saving more and spending less,” he said. Increasing exports will create millions of jobs in the U.S., Obama said.
The U.S. will support “an ambitious and balanced” Doha trade agreement that will open markets, Obama said. He also vowed to work toward completing a trade agreement with South Korea and enter into discussions for a Pacific trade accord.
Japan Alliance
“Our efforts in the Asia Pacific will be rooted, in no small measure, through an enduring and revitalized alliance between the United States and Japan,” Obama said. “But while our commitment to this region begins in Japan, it doesn’t end there.”
Noting he was born in Hawaii and lived in Indonesia as a child, Obama said the Pacific Rim has “helped shape my world view.”
He said his administration will give greater attention to the region’s multilateral organizations, such as the Association of South East Asian Nations. Obama will become the first U.S. president to meet with all 10 members of the group, which includes Myanmar, a nation under U.S. economic sanctions.
“I know that the United States has been disengaged from these organizations in recent years,” Obama said. “So let me be clear: those days have passed.”
China’s Influence
China’s growing economic and military influence in Asia doesn’t necessarily come at the expense of the U.S., Obama said.
“In an inter-connected world, power does not need to be a zero-sum game, and nations need not fear the success of another,” he said. “Cultivating spheres of cooperation -- not competing spheres of influence -- will lead to progress in the Asia Pacific.”
Obama lauded China’s role in the global recovery, saying the world’s third-largest economy played a “critical” part in helping mitigate the recession and jumpstart growth.
The U.S. will continue to approach its relationship with China based on American interests and will pursue areas of “pragmatic cooperation,” he said. That includes emphasizing expanded human rights, he added.
“The United States does not seek to contain China, nor does a deeper relationship with China mean a weakening of our bilateral alliances,” he said.
That cooperation will be tested by Obama’s pledge to push for a global accord on cutting emissions linked to climate change. Obama yesterday with Japan’s Prime Minister Yukio Hatoyama reaffirmed support for a target of cutting emissions by 80 percent by 2050 and today he said the world’s economies must strive for success at a United Nations climate conference in Copenhagen next month.
“All nations must accept their responsibility,” he said. “Each of us must do what we can to grow our economies without endangering our planet, and we must do it together.”
From Tokyo, Obama will travel to Singapore for meetings Asia Pacific Economic Cooperation forum before going on to China and South Korea.
To contact the reporters on this story: Julianna Goldman in Tokyo at jgoldman6@bloomberg.net; Edwin
“We look to rising powers with the view that in the 21st century, the national security and economic growth of one country need not come at the expense of another,” Obama said in an address to an audience of Japanese business and political leaders in Tokyo’s Suntory Hall.
Setting out on his first trip to Asia as president, Obama is using today’s speech to outline his administration’s approach to the region, which includes greater engagement on economic and security issues.
Obama called for unified efforts to block North Korea’s nuclear weapons development and stressed the importance of increasing U.S. exports to achieve greater balance with countries that sell far more goods to the U.S. than they buy from American companies.
The world financial crisis will lead to a rebalancing for the U.S. economy, which will mean “saving more and spending less,” he said. Increasing exports will create millions of jobs in the U.S., Obama said.
The U.S. will support “an ambitious and balanced” Doha trade agreement that will open markets, Obama said. He also vowed to work toward completing a trade agreement with South Korea and enter into discussions for a Pacific trade accord.
Japan Alliance
“Our efforts in the Asia Pacific will be rooted, in no small measure, through an enduring and revitalized alliance between the United States and Japan,” Obama said. “But while our commitment to this region begins in Japan, it doesn’t end there.”
Noting he was born in Hawaii and lived in Indonesia as a child, Obama said the Pacific Rim has “helped shape my world view.”
He said his administration will give greater attention to the region’s multilateral organizations, such as the Association of South East Asian Nations. Obama will become the first U.S. president to meet with all 10 members of the group, which includes Myanmar, a nation under U.S. economic sanctions.
“I know that the United States has been disengaged from these organizations in recent years,” Obama said. “So let me be clear: those days have passed.”
China’s Influence
China’s growing economic and military influence in Asia doesn’t necessarily come at the expense of the U.S., Obama said.
“In an inter-connected world, power does not need to be a zero-sum game, and nations need not fear the success of another,” he said. “Cultivating spheres of cooperation -- not competing spheres of influence -- will lead to progress in the Asia Pacific.”
Obama lauded China’s role in the global recovery, saying the world’s third-largest economy played a “critical” part in helping mitigate the recession and jumpstart growth.
The U.S. will continue to approach its relationship with China based on American interests and will pursue areas of “pragmatic cooperation,” he said. That includes emphasizing expanded human rights, he added.
“The United States does not seek to contain China, nor does a deeper relationship with China mean a weakening of our bilateral alliances,” he said.
That cooperation will be tested by Obama’s pledge to push for a global accord on cutting emissions linked to climate change. Obama yesterday with Japan’s Prime Minister Yukio Hatoyama reaffirmed support for a target of cutting emissions by 80 percent by 2050 and today he said the world’s economies must strive for success at a United Nations climate conference in Copenhagen next month.
“All nations must accept their responsibility,” he said. “Each of us must do what we can to grow our economies without endangering our planet, and we must do it together.”
From Tokyo, Obama will travel to Singapore for meetings Asia Pacific Economic Cooperation forum before going on to China and South Korea.
To contact the reporters on this story: Julianna Goldman in Tokyo at jgoldman6@bloomberg.net; Edwin
Thursday, November 12, 2009
Hong Kong Is New Target of U.S. Crackdown on Global Tax Evasion
Nov. 13 (Bloomberg) -- Hong Kong is a new target of U.S. prosecutors pursuing a global campaign against evaders of federal taxes, spurred by data acquired in their crackdown on Swiss banks.
Prosecutors are trying to determine what role financial professionals in Hong Kong play in tax evasion, according to people familiar with the matter. They are examining how much taxable money was moved to the former British colony that returned to China in 1997, whether accounts were based there in name only and what banks were involved, the people said.
The push follows the government’s success in penetrating Swiss bank secrecy and learning from insiders how UBS AG helped Americans evade taxes. UBS, the largest Swiss bank by assets, avoided prosecution by agreeing in February to pay $780 million and disclose account data on 250 clients. In August, it agreed to supply information on another 4,450.
“They must have reason to believe this is a target-rich environment and a very significant amount of tax evasion is going on there,” said Peter Zeidenberg, a former federal prosecutor now at DLA Piper LLP in Washington.
Since the February settlement, prosecutors have won guilty pleas from six UBS clients who described a web of bankers, lawyers and advisers who helped conceal income and assets. All six hid money in shell companies outside Switzerland. Four used Hong Kong corporations, including toy salesman Jeffrey Chernick.
Probes Beyond Switzerland
Debriefings of Chernick started probes of financial institutions in Switzerland and beyond, “in particular tax- haven jurisdictions such as Hong Kong,” prosecutor Michael Ben’Ary said Oct. 30 at Chernick’s sentencing in Florida.
“From the public statements at the Chernick hearing and elsewhere, the government has made it very clear that they are interested in other secrecy jurisdictions, especially Hong Kong,” said Douglas Tween, an attorney for Chernick, 70.
Chernick told prosecutors he hid sales commissions in an $8 million UBS account in the name of a Hong Kong corporation.
Hong Kong is already changing its laws to implement the Organization for Economic Cooperation and Development’s efforts to enhance tax transparency, said Katherine Kwong, a spokeswoman for the government’s Financial Services and Treasury Bureau.
These changes would help “significantly enhance Hong Kong’s position as a transparent tax jurisdiction,” she said yesterday.
Global Tax Standards
The OECD has a so-called gray list of countries that haven’t complied with global tax standards. Hong Kong and Singapore announced in February that they would put forward legislation to meet them, according to Pascal Saint-Amans, who heads the tax competition division at the OECD. Macau made a similar announcement in March.
The UBS clients who used Hong Kong corporations told prosecutors how their bankers and lawyers helped them set up offshore corporations so their assets would be hidden in accounts that didn’t bear their names, court records show.
Roberto Cittadini, a retired Boeing Co. sales manager, told a federal judge in Seattle Oct. 5 that he didn’t report income from a $1.86 million UBS investment account nominally owned by a Hong Kong corporation.
He said Swiss banker Hansruedi Schumacher and Zurich lawyer Matthias Rickenbach helped him with the account. Schumacher is a former NZB Neue Zuercher Bank manager who once ran the cross- border business for Zurich-based UBS, according to court papers. Both men were indicted Aug. 20 in federal court in Fort Lauderdale, Florida.
Schumacher no longer works at NZB, said Patrick Hunger, corporate secretary, in a telephone interview. He declined to say when Schumacher left the bank and wouldn’t provide Schumacher’s new contact details. Messages left at Rickenbach’s office and home weren’t immediately returned.
Malibu Businessman
John McCarthy, a businessman in Malibu, California, admitted Oct. 20 that he failed to declare $1 million in a UBS Swiss account tied to a Hong Kong entity.
“I’ve been told there are active investigations on the West Coast of Hong Kong account holders,” said McCarthy’s attorney, Steven Toscher, of Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills.
Hong Kong hasn’t been the only tax jurisdiction implicated in the past year. UBS admitted in February that it helped U.S. clients create sham companies in Panama and the British Virgin Islands, while hiding the true owners from the U.S. Internal Revenue Service. UBS clients who pleaded guilty also implicated Singapore, Liechtenstein, Mexico and the Cayman Islands.
The IRS is analyzing a trove of information from more than 7,500 taxpayers who voluntarily disclosed their offshore accounts this year to avoid prosecution. To qualify, clients had to disclose everyone who handled their money overseas and everywhere it went.
‘Scouring the 7,500 Disclosures’
“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes, IRS Commissioner Douglas Shulman said Oct. 14.
He said the IRS is hiring 800 people in the next year and increasing staff in eight overseas offices, including Hong Kong. It also will open offices in Beijing, Sydney and Panama City.
“There is a phenomenal amount of money in undeclared status in Singapore, Hong Kong and maybe now China,” said Scott Michel, an attorney at Caplin & Drysdale in Washington. “The IRS has decided that the template has worked so well for Switzerland that it wants to mimic that investigative strategy with other countries.”
While Hong Kong has strict anti-money laundering measures, it is easy to set up nominee and trust accounts there that obscure the ownership and control of assets, according to the Financial Action Task Force, an inter-governmental body.
‘Relative Ease’
“The availability of corporate services and the relative ease with which shell companies can be purchased contribute to the risk of Hong Kong being used for structuring of the proceeds of financial crime, corruption, tax evasion and smuggling,” according to a June 2008 report by the task force, which works to combat money laundering.
Cittadini trusted UBS, as well as Schumacher and Rickenbach, when they advised setting up accounts in Hong Kong and the British Virgin Islands as a way to keep his assets hidden, his lawyer John Colvin said.
“It’s totally routine,” said Colvin, of Chicoine & Hallett PS in Seattle. “It would cost a few hundred or a few thousand dollars at most to set up.”
Schumacher and Rickenbach told Cittadini such accounts were the easiest way to continue investing in U.S. securities while not reporting the income to the IRS, Colvin said. UBS was required to report the income under an agreement it signed with the U.S. in 2000.
David Ellis, a lawyer in Hong Kong, said he was a “bit surprised” to hear that corporations had been used there to help evade U.S. taxes.
‘Legitimate Tax Benefits’
“I suspect it’s probably more for the legitimate tax benefits of operating through Hong Kong that Hong Kong companies are used rather than its efficiency in evading U.S. tax,” said Ellis of Mayer Brown JSM. “I would have thought for evading U.S. tax you would want a different jurisdiction. But Hong Kong is maybe the legitimate end of it.”
Zetland Corporate Services in Hong Kong sets up companies for foreign clients, said its managing director, Michael Foggo.
“Our client can act as director and shareholder,” Foggo said. “Sometimes our clients do want us to act as directors for them and provide nominee shareholders if they are looking for confidentiality for whatever reason. It’s not something unique to Hong Kong or any other place in Asia.”
Prosecutors are trying to determine what role financial professionals in Hong Kong play in tax evasion, according to people familiar with the matter. They are examining how much taxable money was moved to the former British colony that returned to China in 1997, whether accounts were based there in name only and what banks were involved, the people said.
The push follows the government’s success in penetrating Swiss bank secrecy and learning from insiders how UBS AG helped Americans evade taxes. UBS, the largest Swiss bank by assets, avoided prosecution by agreeing in February to pay $780 million and disclose account data on 250 clients. In August, it agreed to supply information on another 4,450.
“They must have reason to believe this is a target-rich environment and a very significant amount of tax evasion is going on there,” said Peter Zeidenberg, a former federal prosecutor now at DLA Piper LLP in Washington.
Since the February settlement, prosecutors have won guilty pleas from six UBS clients who described a web of bankers, lawyers and advisers who helped conceal income and assets. All six hid money in shell companies outside Switzerland. Four used Hong Kong corporations, including toy salesman Jeffrey Chernick.
Probes Beyond Switzerland
Debriefings of Chernick started probes of financial institutions in Switzerland and beyond, “in particular tax- haven jurisdictions such as Hong Kong,” prosecutor Michael Ben’Ary said Oct. 30 at Chernick’s sentencing in Florida.
“From the public statements at the Chernick hearing and elsewhere, the government has made it very clear that they are interested in other secrecy jurisdictions, especially Hong Kong,” said Douglas Tween, an attorney for Chernick, 70.
Chernick told prosecutors he hid sales commissions in an $8 million UBS account in the name of a Hong Kong corporation.
Hong Kong is already changing its laws to implement the Organization for Economic Cooperation and Development’s efforts to enhance tax transparency, said Katherine Kwong, a spokeswoman for the government’s Financial Services and Treasury Bureau.
These changes would help “significantly enhance Hong Kong’s position as a transparent tax jurisdiction,” she said yesterday.
Global Tax Standards
The OECD has a so-called gray list of countries that haven’t complied with global tax standards. Hong Kong and Singapore announced in February that they would put forward legislation to meet them, according to Pascal Saint-Amans, who heads the tax competition division at the OECD. Macau made a similar announcement in March.
The UBS clients who used Hong Kong corporations told prosecutors how their bankers and lawyers helped them set up offshore corporations so their assets would be hidden in accounts that didn’t bear their names, court records show.
Roberto Cittadini, a retired Boeing Co. sales manager, told a federal judge in Seattle Oct. 5 that he didn’t report income from a $1.86 million UBS investment account nominally owned by a Hong Kong corporation.
He said Swiss banker Hansruedi Schumacher and Zurich lawyer Matthias Rickenbach helped him with the account. Schumacher is a former NZB Neue Zuercher Bank manager who once ran the cross- border business for Zurich-based UBS, according to court papers. Both men were indicted Aug. 20 in federal court in Fort Lauderdale, Florida.
Schumacher no longer works at NZB, said Patrick Hunger, corporate secretary, in a telephone interview. He declined to say when Schumacher left the bank and wouldn’t provide Schumacher’s new contact details. Messages left at Rickenbach’s office and home weren’t immediately returned.
Malibu Businessman
John McCarthy, a businessman in Malibu, California, admitted Oct. 20 that he failed to declare $1 million in a UBS Swiss account tied to a Hong Kong entity.
“I’ve been told there are active investigations on the West Coast of Hong Kong account holders,” said McCarthy’s attorney, Steven Toscher, of Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills.
Hong Kong hasn’t been the only tax jurisdiction implicated in the past year. UBS admitted in February that it helped U.S. clients create sham companies in Panama and the British Virgin Islands, while hiding the true owners from the U.S. Internal Revenue Service. UBS clients who pleaded guilty also implicated Singapore, Liechtenstein, Mexico and the Cayman Islands.
The IRS is analyzing a trove of information from more than 7,500 taxpayers who voluntarily disclosed their offshore accounts this year to avoid prosecution. To qualify, clients had to disclose everyone who handled their money overseas and everywhere it went.
‘Scouring the 7,500 Disclosures’
“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes, IRS Commissioner Douglas Shulman said Oct. 14.
He said the IRS is hiring 800 people in the next year and increasing staff in eight overseas offices, including Hong Kong. It also will open offices in Beijing, Sydney and Panama City.
“There is a phenomenal amount of money in undeclared status in Singapore, Hong Kong and maybe now China,” said Scott Michel, an attorney at Caplin & Drysdale in Washington. “The IRS has decided that the template has worked so well for Switzerland that it wants to mimic that investigative strategy with other countries.”
While Hong Kong has strict anti-money laundering measures, it is easy to set up nominee and trust accounts there that obscure the ownership and control of assets, according to the Financial Action Task Force, an inter-governmental body.
‘Relative Ease’
“The availability of corporate services and the relative ease with which shell companies can be purchased contribute to the risk of Hong Kong being used for structuring of the proceeds of financial crime, corruption, tax evasion and smuggling,” according to a June 2008 report by the task force, which works to combat money laundering.
Cittadini trusted UBS, as well as Schumacher and Rickenbach, when they advised setting up accounts in Hong Kong and the British Virgin Islands as a way to keep his assets hidden, his lawyer John Colvin said.
“It’s totally routine,” said Colvin, of Chicoine & Hallett PS in Seattle. “It would cost a few hundred or a few thousand dollars at most to set up.”
Schumacher and Rickenbach told Cittadini such accounts were the easiest way to continue investing in U.S. securities while not reporting the income to the IRS, Colvin said. UBS was required to report the income under an agreement it signed with the U.S. in 2000.
David Ellis, a lawyer in Hong Kong, said he was a “bit surprised” to hear that corporations had been used there to help evade U.S. taxes.
‘Legitimate Tax Benefits’
“I suspect it’s probably more for the legitimate tax benefits of operating through Hong Kong that Hong Kong companies are used rather than its efficiency in evading U.S. tax,” said Ellis of Mayer Brown JSM. “I would have thought for evading U.S. tax you would want a different jurisdiction. But Hong Kong is maybe the legitimate end of it.”
Zetland Corporate Services in Hong Kong sets up companies for foreign clients, said its managing director, Michael Foggo.
“Our client can act as director and shareholder,” Foggo said. “Sometimes our clients do want us to act as directors for them and provide nominee shareholders if they are looking for confidentiality for whatever reason. It’s not something unique to Hong Kong or any other place in Asia.”
Asia Summit Awaits Word on Obama Trade Policy Promised in May
Nov. 13 (Bloomberg) -- President Barack Obama would press for new trade accords only after he set out his approach to international commerce in a speech, U.S. officials said in May. Six months later, trading partners are still waiting.
“There is deep frustration at the lack of any trade policy,” said Troy Stangarone, director of congressional affairs at the Korea Economic Institute in Washington, a public policy research group funded mostly by the South Korean government.
Trade will be a focus of Obama’s eight-day trip to Asia, beginning today in Japan. He will also attend the Asia-Pacific Economic Cooperation summit in Singapore and make visits to Shanghai, Beijing and Seoul.
The region’s leaders are impatient for a clear U.S. approach to trade, said C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington.
Governments “are hoping that Obama’s trip will begin the process of re-engaging Asia on trade,” Bergsten, who met with South Korea’s President Lee Myung Bak recently, said in an interview. “Trade is very high on their diplomatic agenda.”
Obama inherited bilateral trade accords with Colombia, Panama and South Korea that President George W. Bush completed and Congress never approved. Bush also started the Doha Round of negotiations in the World Trade Organization, which remain unfinished, and said the U.S. would like to join a trade agreement among Singapore, New Zealand, Chile and Brunei.
During his presidential campaign, Obama criticized the pending trade deals with Colombia and South Korea. As president, he sided with the United Steelworkers union, imposing duties of 35 percent on automobile tire imports from China in September. He also joined the leaders of the Group of Eight countries in promising to “keep markets open” and “reject protectionism of any kind.”
‘Set a Balance’
Everett Eissenstat, a career official in the U.S. Trade Representative’s office, told a Senate panel in May that Obama wouldn’t press for new agreements until he could give a speech defining his trade agenda and how it fit into his other priorities.
The accords have remained in limbo since then, business executives, overseas governments and some lawmakers from Obama’s party have said.
“For the past 10 months, the United States has lacked a comprehensive trade agenda,” Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said Nov. 10. “That absence is palpable.”
Enforcement, Transparency
“Obama laid out a trade agenda in March 2009, and it set out a balance of job-creating market access openings, enforcement, transparency and other policy priorities,” Deborah Mesloh, a spokeswoman for the U.S. Trade Representative, said in e-mailed statement. “On pending free trade agreements, we continue our consultation with stakeholders and Congress to understand concerns and to develop proposals for addressing these concerns.”
Obama, in a meeting with his Economic Recovery Advisory Board on Nov. 2, said the U.S. had a “debilitating gridlock of trade policy,” which made it by turns too open or too timid.
The president will use his Asia trip to provide more details about how he plans to use trade policy to boost exports to Asia, according to a senior administration official who declined to be identified discussing the president’s intentions.
Obama’s position on trade is “a constant question,” said Christopher Wenk, the U.S. Chamber of Commerce’s director for trade.
Executives in Geneva
Wenk said that during a trade trip with executives from Citigroup Inc., Ford Motor Co. and General Electric Co. to meet World Trade Organization officials in Geneva, his group was peppered with inquiries about U.S. intentions.
“Have you got any indication from the Obama administration as to what their trade policy may be?” Clare Thorpe, Ireland’s agriculture attaché in Washington asked a European Union trade representative at a public forum Oct. 26.
Canadian officials are trying to find out if the U.S. will let Canadian-based companies compete for stimulus projects, an irritant since Obama signed that measure in February, said Birgit Matthiesen, the Washington-based adviser to the Canadian Manufacturers & Exporters association.
The administration is lacking two of three deputy trade representatives, and the top trade official at the Commerce Department, as those nominees haven’t been confirmed by the Senate.
“They don’t have their people in place yet,” Wenk said.
By this time in their term, the past two presidents had embraced trade initiatives.
Congressional Approval
Bush won congressional approval for a trade deal with Jordan and was days away from launching the Doha Round at this point in 2001. President Bill Clinton was in the final lobbying push to get lawmakers to approve the North American Free Trade Agreement, which passed the House on Nov. 17, 1993.
No similar action is likely during Obama’s first year, in part because the economy and health-care legislation have dominated his attention, Stangarone, of the Korea Economic Institute, said in an interview.
There are economic costs to delay, said Tom Donohue, president of the Washington-based U.S. Chamber of Commerce, the nation’s largest business organization.
“We are standing on the sidelines while Asian nations clinch new trade deals,” Donohue said in a statement before leaving to attend the APEC trade meetings. “We’ll pay the price if this continues. It’s time to see action from Washington.”
“There is deep frustration at the lack of any trade policy,” said Troy Stangarone, director of congressional affairs at the Korea Economic Institute in Washington, a public policy research group funded mostly by the South Korean government.
Trade will be a focus of Obama’s eight-day trip to Asia, beginning today in Japan. He will also attend the Asia-Pacific Economic Cooperation summit in Singapore and make visits to Shanghai, Beijing and Seoul.
The region’s leaders are impatient for a clear U.S. approach to trade, said C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington.
Governments “are hoping that Obama’s trip will begin the process of re-engaging Asia on trade,” Bergsten, who met with South Korea’s President Lee Myung Bak recently, said in an interview. “Trade is very high on their diplomatic agenda.”
Obama inherited bilateral trade accords with Colombia, Panama and South Korea that President George W. Bush completed and Congress never approved. Bush also started the Doha Round of negotiations in the World Trade Organization, which remain unfinished, and said the U.S. would like to join a trade agreement among Singapore, New Zealand, Chile and Brunei.
During his presidential campaign, Obama criticized the pending trade deals with Colombia and South Korea. As president, he sided with the United Steelworkers union, imposing duties of 35 percent on automobile tire imports from China in September. He also joined the leaders of the Group of Eight countries in promising to “keep markets open” and “reject protectionism of any kind.”
‘Set a Balance’
Everett Eissenstat, a career official in the U.S. Trade Representative’s office, told a Senate panel in May that Obama wouldn’t press for new agreements until he could give a speech defining his trade agenda and how it fit into his other priorities.
The accords have remained in limbo since then, business executives, overseas governments and some lawmakers from Obama’s party have said.
“For the past 10 months, the United States has lacked a comprehensive trade agenda,” Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said Nov. 10. “That absence is palpable.”
Enforcement, Transparency
“Obama laid out a trade agenda in March 2009, and it set out a balance of job-creating market access openings, enforcement, transparency and other policy priorities,” Deborah Mesloh, a spokeswoman for the U.S. Trade Representative, said in e-mailed statement. “On pending free trade agreements, we continue our consultation with stakeholders and Congress to understand concerns and to develop proposals for addressing these concerns.”
Obama, in a meeting with his Economic Recovery Advisory Board on Nov. 2, said the U.S. had a “debilitating gridlock of trade policy,” which made it by turns too open or too timid.
The president will use his Asia trip to provide more details about how he plans to use trade policy to boost exports to Asia, according to a senior administration official who declined to be identified discussing the president’s intentions.
Obama’s position on trade is “a constant question,” said Christopher Wenk, the U.S. Chamber of Commerce’s director for trade.
Executives in Geneva
Wenk said that during a trade trip with executives from Citigroup Inc., Ford Motor Co. and General Electric Co. to meet World Trade Organization officials in Geneva, his group was peppered with inquiries about U.S. intentions.
“Have you got any indication from the Obama administration as to what their trade policy may be?” Clare Thorpe, Ireland’s agriculture attaché in Washington asked a European Union trade representative at a public forum Oct. 26.
Canadian officials are trying to find out if the U.S. will let Canadian-based companies compete for stimulus projects, an irritant since Obama signed that measure in February, said Birgit Matthiesen, the Washington-based adviser to the Canadian Manufacturers & Exporters association.
The administration is lacking two of three deputy trade representatives, and the top trade official at the Commerce Department, as those nominees haven’t been confirmed by the Senate.
“They don’t have their people in place yet,” Wenk said.
By this time in their term, the past two presidents had embraced trade initiatives.
Congressional Approval
Bush won congressional approval for a trade deal with Jordan and was days away from launching the Doha Round at this point in 2001. President Bill Clinton was in the final lobbying push to get lawmakers to approve the North American Free Trade Agreement, which passed the House on Nov. 17, 1993.
No similar action is likely during Obama’s first year, in part because the economy and health-care legislation have dominated his attention, Stangarone, of the Korea Economic Institute, said in an interview.
There are economic costs to delay, said Tom Donohue, president of the Washington-based U.S. Chamber of Commerce, the nation’s largest business organization.
“We are standing on the sidelines while Asian nations clinch new trade deals,” Donohue said in a statement before leaving to attend the APEC trade meetings. “We’ll pay the price if this continues. It’s time to see action from Washington.”
Tuesday, November 10, 2009
London Finance Job Openings Rise to One-Year High, Survey Shows
Nov. 11 (Bloomberg) -- Job openings in London’s financial- services industry rose to the highest level in a year last month, according to a survey by recruitment firm Morgan McKinley.
The number of openings climbed 15 percent to 4,410, the most recorded in any one month since October 2008, the London-based company said today.
“The City jobs market has seen and continues to see a general trend of improvement,” Andrew Evans, managing director of Morgan McKinley’s financial-services unit, said in an e- mailed statement. “Progress has been slow and somewhat unsteady over the course of 2009, but hiring within London’s financial services sector is following an upward trend.”
Prime Minister Gordon Brown is trying to revive the recession-mired economy in time for an election that must be held by June. The Office for National Statistics will say later today that U.K. claims for jobless benefits rose in October by the least since May 2008, according to the median forecast of 28 economists in a Bloomberg survey.
The average salary registered by the Morgan McKinley survey fell 1.5 percent to 51,350 pounds ($85,639) in October, from 52,142 the previous month. That compares with 48,021 pounds a year earlier, Morgan McKinley said.
KPMG LLP and the Recruitment and Employment Federation said in a Nov. 4 report that strains in the labor market eased in October. A measure of permanent job placements rose to 54.6, the highest in two years, from 51.3 the previous month.
Lloyds Banking Group Plc, Britain’s biggest mortgage lender, said yesterday it plans to cut about 5,000 jobs in its administration, insurance and mortgage units. Lloyds, which already announced more than 8,000 jobs cuts since its January takeover of HBOS Plc, follows Royal Bank of Scotland Group Plc and HSBC Holdings Plc in cutting jobs. The two lenders said last week they would eliminate a combined 5,400 positions.
The number of openings climbed 15 percent to 4,410, the most recorded in any one month since October 2008, the London-based company said today.
“The City jobs market has seen and continues to see a general trend of improvement,” Andrew Evans, managing director of Morgan McKinley’s financial-services unit, said in an e- mailed statement. “Progress has been slow and somewhat unsteady over the course of 2009, but hiring within London’s financial services sector is following an upward trend.”
Prime Minister Gordon Brown is trying to revive the recession-mired economy in time for an election that must be held by June. The Office for National Statistics will say later today that U.K. claims for jobless benefits rose in October by the least since May 2008, according to the median forecast of 28 economists in a Bloomberg survey.
The average salary registered by the Morgan McKinley survey fell 1.5 percent to 51,350 pounds ($85,639) in October, from 52,142 the previous month. That compares with 48,021 pounds a year earlier, Morgan McKinley said.
KPMG LLP and the Recruitment and Employment Federation said in a Nov. 4 report that strains in the labor market eased in October. A measure of permanent job placements rose to 54.6, the highest in two years, from 51.3 the previous month.
Lloyds Banking Group Plc, Britain’s biggest mortgage lender, said yesterday it plans to cut about 5,000 jobs in its administration, insurance and mortgage units. Lloyds, which already announced more than 8,000 jobs cuts since its January takeover of HBOS Plc, follows Royal Bank of Scotland Group Plc and HSBC Holdings Plc in cutting jobs. The two lenders said last week they would eliminate a combined 5,400 positions.
Asian Stocks Advance as Japan Machinery Orders Beat Estimates
Nov. 11 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index higher for a fourth day, after Japan’s machinery orders increased more than economists expected and shipping rates climbed.
Mori Seiki Co., a maker of precision lathes, advanced 1.9 percent as orders for Japanese machinery climbed 10.5 percent in September. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 3.2 percent in Seoul as the Baltic Dry Index posted its steepest jump in a month. Newcrest Mining Ltd., Australia’s largest gold producer, gained 0.7 percent as bullion advanced. Daikin Industries Ltd., the world’s No. 2 air conditioner maker, jumped 3.2 percent after lifting its annual profit forecast.
The MSCI Asia Pacific Index advanced 0.7 percent to 118.83 as of 9:54 a.m. in Tokyo, extending its four-day increase to 3.6 percent. South Korea’s Kospi climbed 0.5 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent.
Japan’s Nikkei 225 Stock Average added 0.7 percent to 9,922.12. The 10.5 percent increase in September for machinery orders, an indicator of business investment in three to six months, beat economist predictions for a 4.1 percent increase.
Asian investors are also awaiting data on industrial production, inflation and investments from China later this morning.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent. The gauge was little changed yesterday and the Dow Jones Industrial Average climbed to a 13-month high for a second day. Earnings from bond guarantor MBIA Inc., engineering company Fluor Corp. and the video-game publisher Electronic Arts Inc. disappointed investors, while American Express Co. and Bank of America Corp. rallied.
Mori Seiki, Komatsu
Mori Seiki gained 1.9 percent to 921 yen. Fanuc Ltd., the world’s largest maker of industrial robots, climbed 1.6 percent to 7,740 yen. Komatsu Ltd., the world’s second-biggest maker of construction equipment, advanced 0.9 percent to 1875 yen after the stock was raised to “neutral” from “underperform” at Merrill Lynch & Co.
“The bottom is probably behind us for capital spending,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “The retrenchment phase is over and the corporate sector as a whole should gradually pick up in a self-sustained way.”
STX Pan Ocean jumped 3.2 percent to 11,350 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line operator by sales, rose 1.5 percent to 330 yen.
The Baltic Dry Index, a measure of shipping costs for commodities, surged 3.9 percent yesterday, a ninth consecutive gain and the steepest rally since Oct. 8.
Gold Futures
Newcrest added 0.7 percent to A$35.41. Gold futures in New York increased for an eighth-straight session today in after- hours trading, rising 0.5 percent to $1,107.60 an ounce.
The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx.
Daikin rose 3.2 percent to 3,270 yen after raising its full-year forecast for net income, saying it sees signs of recovery in demand in China.
Mori Seiki Co., a maker of precision lathes, advanced 1.9 percent as orders for Japanese machinery climbed 10.5 percent in September. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 3.2 percent in Seoul as the Baltic Dry Index posted its steepest jump in a month. Newcrest Mining Ltd., Australia’s largest gold producer, gained 0.7 percent as bullion advanced. Daikin Industries Ltd., the world’s No. 2 air conditioner maker, jumped 3.2 percent after lifting its annual profit forecast.
The MSCI Asia Pacific Index advanced 0.7 percent to 118.83 as of 9:54 a.m. in Tokyo, extending its four-day increase to 3.6 percent. South Korea’s Kospi climbed 0.5 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent.
Japan’s Nikkei 225 Stock Average added 0.7 percent to 9,922.12. The 10.5 percent increase in September for machinery orders, an indicator of business investment in three to six months, beat economist predictions for a 4.1 percent increase.
Asian investors are also awaiting data on industrial production, inflation and investments from China later this morning.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent. The gauge was little changed yesterday and the Dow Jones Industrial Average climbed to a 13-month high for a second day. Earnings from bond guarantor MBIA Inc., engineering company Fluor Corp. and the video-game publisher Electronic Arts Inc. disappointed investors, while American Express Co. and Bank of America Corp. rallied.
Mori Seiki, Komatsu
Mori Seiki gained 1.9 percent to 921 yen. Fanuc Ltd., the world’s largest maker of industrial robots, climbed 1.6 percent to 7,740 yen. Komatsu Ltd., the world’s second-biggest maker of construction equipment, advanced 0.9 percent to 1875 yen after the stock was raised to “neutral” from “underperform” at Merrill Lynch & Co.
“The bottom is probably behind us for capital spending,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “The retrenchment phase is over and the corporate sector as a whole should gradually pick up in a self-sustained way.”
STX Pan Ocean jumped 3.2 percent to 11,350 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line operator by sales, rose 1.5 percent to 330 yen.
The Baltic Dry Index, a measure of shipping costs for commodities, surged 3.9 percent yesterday, a ninth consecutive gain and the steepest rally since Oct. 8.
Gold Futures
Newcrest added 0.7 percent to A$35.41. Gold futures in New York increased for an eighth-straight session today in after- hours trading, rising 0.5 percent to $1,107.60 an ounce.
The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx.
Daikin rose 3.2 percent to 3,270 yen after raising its full-year forecast for net income, saying it sees signs of recovery in demand in China.
Monday, November 9, 2009
MSCI Emerging-Markets Index May Rise 28%, Morgan Stanley Says
Nov. 10 (Bloomberg) -- Emerging-market stocks may rise 28 percent by the end of 2010, with gains slowing from this year’s pace amid concern interest rates and oil prices will increase, according to Morgan Stanley.
The MSCI Emerging Markets Index may rise to 1,200 by the end of next year, compared with the Nov. 6 level of 936.36, strategists led by Jonathan Garner said in a report. They set a forecast of 486 for the MSCI Asia Pacific excluding Japan Index, representing a 23 percent gain from last week, according to a separate report.
“Economies and earnings are recovering and it is likely too soon in the cycle for a major peak in emerging-market equities,” Garner, Morgan Stanley’s chief Asian and emerging- market strategist, wrote in the report dated yesterday. “However, we do face the headwinds of monetary policy tightening and a higher oil price.”
Emerging markets have led the rally in global stocks this year, making up all 10 best performers among the 89 country benchmarks tracked by Bloomberg. The MSCI index for 22 developing nations has climbed 65 percent in the year till Nov. 6, set for its best annual performance since 1993, while the MSCI Asian excluding Japan index has rallied 60 percent during the same period.
The MSCI Emerging Markets Index rose 2.5 percent to 959.66 yesterday. Garner, who predicted in June that the measure will rise to 985 over a 12-month period, said shares in developing nations tend to reach a “local peak in performance” before the Federal Reserve’s first rate increase.
“Micro” themes will dominate emerging markets next year, and investors should favor energy, financial and so-called consumer discretionary stocks, the brokerage said. They cut technology stocks to “equal-weight” because of valuations and “historical sensitivity to a global rate hike cycle,” according to the note sent to clients.
Morgan Stanley said China is the bank’s biggest country “overweight” while South Africa is the largest “underweight.”
The MSCI Emerging Markets Index may rise to 1,200 by the end of next year, compared with the Nov. 6 level of 936.36, strategists led by Jonathan Garner said in a report. They set a forecast of 486 for the MSCI Asia Pacific excluding Japan Index, representing a 23 percent gain from last week, according to a separate report.
“Economies and earnings are recovering and it is likely too soon in the cycle for a major peak in emerging-market equities,” Garner, Morgan Stanley’s chief Asian and emerging- market strategist, wrote in the report dated yesterday. “However, we do face the headwinds of monetary policy tightening and a higher oil price.”
Emerging markets have led the rally in global stocks this year, making up all 10 best performers among the 89 country benchmarks tracked by Bloomberg. The MSCI index for 22 developing nations has climbed 65 percent in the year till Nov. 6, set for its best annual performance since 1993, while the MSCI Asian excluding Japan index has rallied 60 percent during the same period.
The MSCI Emerging Markets Index rose 2.5 percent to 959.66 yesterday. Garner, who predicted in June that the measure will rise to 985 over a 12-month period, said shares in developing nations tend to reach a “local peak in performance” before the Federal Reserve’s first rate increase.
“Micro” themes will dominate emerging markets next year, and investors should favor energy, financial and so-called consumer discretionary stocks, the brokerage said. They cut technology stocks to “equal-weight” because of valuations and “historical sensitivity to a global rate hike cycle,” according to the note sent to clients.
Morgan Stanley said China is the bank’s biggest country “overweight” while South Africa is the largest “underweight.”
Asian Stocks Advance on Commodity Prices, Brokerage Upgrades
Nov. 10 (Bloomberg) -- Asian stocks climbed, lifting the MSCI Asia Pacific Index for a third day, as a rally in commodities boosted materials producers and brokerages upgraded Australian financial shares.
Newcrest Mining Ltd., Australia’s biggest gold producer, added 1 percent as bullion advanced to a record. Commonwealth Bank of Australia rose 1.3 percent after UBS AG recommended buying the shares and Axa Asia Pacific Holdings Ltd. gained 2.6 percent after Credit Suisse Group AG lifted the stock to “neutral.” Hyundai Motor Co., South Korea’s largest automaker, rallied 3.4 percent after China’s auto sales climbed.
“A rise in gold futures will lure investors and gold- related stocks will be bought,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.
The MSCI Asia Pacific Index gained 0.8 percent to 118.53 as of 10:18 a.m. in Tokyo, set to close at the highest level since Oct. 26. Japan’s Nikkei 225 Stock Average rose 1.4 percent to 9,950.19. South Korea’s Kospi Index added 1.2 percent, while Australia’s S&P/ASX 200 Index advanced 1.2 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge advanced 2.2 percent yesterday for its sixth straight increase as the Group of 20 nations pledged to maintain stimulus measures until economic recoveries take hold.
The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, exceeding gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Gold Rises
Newcrest added 1 percent to A$35.65. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, surged 3.6 percent to A$4.04. Mitsui & Co., which generates more than half its profits from commodities dealing, climbed 2.8 percent to 1,201 yen.
Gold futures for December delivery added 0.2 percent to $1,104 an ounce in New York after reaching a record $1,111.70 yesterday. Crude oil climbed 2.6 percent to $79.43 a barrel. The London Metals Index, a measure of six metals including copper and zinc, gained 0.9 percent.
Commonwealth Bank rose 1.3 percent to A$55.82. The nation’s biggest lender was raised to “buy” from “neutral” at UBS. The company said yesterday first-quarter unaudited cash profit totaled about A$1.4 billion ($1.3 billion).
Axa Asia Pacific, which yesterday rejected an unsolicited $10 billion takeover bid from parent Axa SA and wealth manager AMP Ltd., gained 2.6 percent to A$5.85. Credit Suisse lifted the shares to “neutral” from “underperform.”
Hyundai Motor, which cited growth in China for its record quarterly profit in the three months to Sept. 30, gained 3.4 percent to 106,000 won. NSK Ltd., a maker of bearings for autos, added 2.7 percent to 582 yen. JTEKT Corp., a maker of power steering, jumped 2.7 percent to 989 yen.
China’s passenger-car sales rose 76 percent last month as economic growth and government stimulus measures spurred demand in the world’s largest auto market. Sales climbed to 946,400 units, the China Association of Automobile Manufacturers said.
Newcrest Mining Ltd., Australia’s biggest gold producer, added 1 percent as bullion advanced to a record. Commonwealth Bank of Australia rose 1.3 percent after UBS AG recommended buying the shares and Axa Asia Pacific Holdings Ltd. gained 2.6 percent after Credit Suisse Group AG lifted the stock to “neutral.” Hyundai Motor Co., South Korea’s largest automaker, rallied 3.4 percent after China’s auto sales climbed.
“A rise in gold futures will lure investors and gold- related stocks will be bought,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.
The MSCI Asia Pacific Index gained 0.8 percent to 118.53 as of 10:18 a.m. in Tokyo, set to close at the highest level since Oct. 26. Japan’s Nikkei 225 Stock Average rose 1.4 percent to 9,950.19. South Korea’s Kospi Index added 1.2 percent, while Australia’s S&P/ASX 200 Index advanced 1.2 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge advanced 2.2 percent yesterday for its sixth straight increase as the Group of 20 nations pledged to maintain stimulus measures until economic recoveries take hold.
The MSCI Asia Pacific Index has climbed 68 percent from a more than five-year low on March 9, exceeding gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Gold Rises
Newcrest added 1 percent to A$35.65. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, surged 3.6 percent to A$4.04. Mitsui & Co., which generates more than half its profits from commodities dealing, climbed 2.8 percent to 1,201 yen.
Gold futures for December delivery added 0.2 percent to $1,104 an ounce in New York after reaching a record $1,111.70 yesterday. Crude oil climbed 2.6 percent to $79.43 a barrel. The London Metals Index, a measure of six metals including copper and zinc, gained 0.9 percent.
Commonwealth Bank rose 1.3 percent to A$55.82. The nation’s biggest lender was raised to “buy” from “neutral” at UBS. The company said yesterday first-quarter unaudited cash profit totaled about A$1.4 billion ($1.3 billion).
Axa Asia Pacific, which yesterday rejected an unsolicited $10 billion takeover bid from parent Axa SA and wealth manager AMP Ltd., gained 2.6 percent to A$5.85. Credit Suisse lifted the shares to “neutral” from “underperform.”
Hyundai Motor, which cited growth in China for its record quarterly profit in the three months to Sept. 30, gained 3.4 percent to 106,000 won. NSK Ltd., a maker of bearings for autos, added 2.7 percent to 582 yen. JTEKT Corp., a maker of power steering, jumped 2.7 percent to 989 yen.
China’s passenger-car sales rose 76 percent last month as economic growth and government stimulus measures spurred demand in the world’s largest auto market. Sales climbed to 946,400 units, the China Association of Automobile Manufacturers said.
Sunday, November 8, 2009
IMF Signals Record-Low U.S. Rates Funding Global ‘Carry Trade’
Nov. 9 (Bloomberg) -- The International Monetary Fund signalled record low U.S. interest rates are funding global “carry trades” and the dollar is still overvalued as concerns mount that new financial imbalances are forming.
“There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report published on Nov. 7. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” While the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side.”
With investors able to borrow at near-zero rates in the U.S., some economists are concerned that markets may become distorted as traders plow those funds into riskier assets. Nouriel Roubini, the economist who forecast the financial crisis in 2006, said Nov. 4 that investors are milking the “mother of all carry trades.”
“U.S. interest rates look to remain near zero through the first half of 2010 at the very least, which provides traders plenty of time to continue with carry trades,” said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. “Labor-market conditions are still very challenging in the U.S., and the rest of the world is improving faster. The dollar remains the weakest link.”
Dollar’s Slide
The dollar has dropped about 13 percent against a basket of currencies from its major trading partners in the past seven months. Meanwhile, the MSCI All-Countries World Index of global equities has gained about two-thirds since March and sugar has soared 90 percent this year.
U.S. Federal Reserve policymakers, at the end of a two-day policy meeting on Nov. 4, reiterated their intention to keep interest rates “exceptionally low” for “an extended period.”
Speculation that the Fed will keep rates on hold into next year was further fueled by U.S. Labor Department figures on Nov. 6 that showed the nation’s unemployment rate jumped to 10.2 percent in October, exceeding 10 percent for the first time since 1983.
In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 7 percent in South Africa and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York, said the dollar carry trade is likely to continue in coming months, and he expects the U.S. currency will decline further.
Risk Appetite
“The key wildcard to dollar carry trades is whether people continue to show an appetite for risk,” Chandler said. “That’ll weigh on the dollar.”
The euro’s exchange rate “is on the strong side of its equilibrium,” the Washington-based IMF said.
The fund, which published the report as officials from the Group of 20 nations gathered in St. Andrews, Scotland, also said that China’s yuan is “significantly undervalued.”
The Chinese currency “has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective,” the IMF said.
China has kept the exchange rate at about 6.83 to the dollar since July 2008, after letting the currency strengthen 21 percent in the previous three years. Appreciation was halted to help sustain exports amid a global recession.
Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that “the pressure from the international community to allow yuan appreciation is not that big,” deflecting calls from Europe and Japan to let it rise.
Since President Barack Obama took office this year, “the U.S. hasn’t been as vocal” about the Chinese currency as it was previously, Brown Brothers’ Chandler said.
“There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report published on Nov. 7. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” While the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side.”
With investors able to borrow at near-zero rates in the U.S., some economists are concerned that markets may become distorted as traders plow those funds into riskier assets. Nouriel Roubini, the economist who forecast the financial crisis in 2006, said Nov. 4 that investors are milking the “mother of all carry trades.”
“U.S. interest rates look to remain near zero through the first half of 2010 at the very least, which provides traders plenty of time to continue with carry trades,” said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. “Labor-market conditions are still very challenging in the U.S., and the rest of the world is improving faster. The dollar remains the weakest link.”
Dollar’s Slide
The dollar has dropped about 13 percent against a basket of currencies from its major trading partners in the past seven months. Meanwhile, the MSCI All-Countries World Index of global equities has gained about two-thirds since March and sugar has soared 90 percent this year.
U.S. Federal Reserve policymakers, at the end of a two-day policy meeting on Nov. 4, reiterated their intention to keep interest rates “exceptionally low” for “an extended period.”
Speculation that the Fed will keep rates on hold into next year was further fueled by U.S. Labor Department figures on Nov. 6 that showed the nation’s unemployment rate jumped to 10.2 percent in October, exceeding 10 percent for the first time since 1983.
In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 7 percent in South Africa and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York, said the dollar carry trade is likely to continue in coming months, and he expects the U.S. currency will decline further.
Risk Appetite
“The key wildcard to dollar carry trades is whether people continue to show an appetite for risk,” Chandler said. “That’ll weigh on the dollar.”
The euro’s exchange rate “is on the strong side of its equilibrium,” the Washington-based IMF said.
The fund, which published the report as officials from the Group of 20 nations gathered in St. Andrews, Scotland, also said that China’s yuan is “significantly undervalued.”
The Chinese currency “has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective,” the IMF said.
China has kept the exchange rate at about 6.83 to the dollar since July 2008, after letting the currency strengthen 21 percent in the previous three years. Appreciation was halted to help sustain exports amid a global recession.
Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that “the pressure from the international community to allow yuan appreciation is not that big,” deflecting calls from Europe and Japan to let it rise.
Since President Barack Obama took office this year, “the U.S. hasn’t been as vocal” about the Chinese currency as it was previously, Brown Brothers’ Chandler said.
Most Asian Stocks Gain; Financial Companies Rise After Axa Bid
Nov. 9 (Bloomberg) -- Most Asian stocks climbed, led by financial companies after a takeover bid in Australia’s insurance industry. Japanese shares declined after the yen rose to the strongest in a week, hurting overseas sales for exporters.
Axa Asia Pacific Holdings Ltd. soared 29 percent after rejecting an unsolicited offer from its French parent Axa SA and Australian asset manager AMP Ltd. Olympus Corp., the world’s biggest maker of endoscopes, slumped 3.9 percent as the company’s first-half operating profit dropped 11 percent, partially due to the strong yen. Nissan Motor Co., which gets about three-quarters of its sales abroad, lost 2.6 percent.
The MSCI Asia Pacific Index advanced 0.2 percent to 116.56 as of 9:26 a.m. in Tokyo, with about four stocks rising for every three that fell. In New York on Nov. 6, the Standard & Poor’s 500 Index climbed 0.3 percent, as a report showing unemployment exceeded 10 percent prompted speculation the Federal Reserve will maintain a loose monetary policy.
“The employment data is positive for the stock market as that means monetary relaxation will continue,” said Tomochika Kitaoka, chief strategist in Tokyo at Mizuho Financial Group Inc. “Doubts will be eliminated that Japanese companies will post higher profits this fiscal year.”
Japan’s Nikkei 225 Stock Average fell 0.3 percent to 9,674.99. Australia’s S&P/ASX 200 Index rallied 1.4 percent, buoyed by Commonwealth Bank of Australia’s report of A$1.4 billion ($1.3 billion) in first-quarter profit.
U.S. Unemployment
U.S. stock futures were little-changed. The S&P 500 climbed on Nov. 6 after ratings of General Electric Co. and Macy’s Inc. were lifted. The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, a Labor Department report showed.
The MSCI Asia Pacific Index has climbed 65 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Olympus lost 3.9 percent to 2,745 yen. Nissan declined 2.6 percent to 639 yen.
The yen rallied to as high as 89.62 versus the dollar on Nov. 6 following the unemployment report. That compared with 90.64 at the close of stock trading in Tokyo that day.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net;
Axa Asia Pacific Holdings Ltd. soared 29 percent after rejecting an unsolicited offer from its French parent Axa SA and Australian asset manager AMP Ltd. Olympus Corp., the world’s biggest maker of endoscopes, slumped 3.9 percent as the company’s first-half operating profit dropped 11 percent, partially due to the strong yen. Nissan Motor Co., which gets about three-quarters of its sales abroad, lost 2.6 percent.
The MSCI Asia Pacific Index advanced 0.2 percent to 116.56 as of 9:26 a.m. in Tokyo, with about four stocks rising for every three that fell. In New York on Nov. 6, the Standard & Poor’s 500 Index climbed 0.3 percent, as a report showing unemployment exceeded 10 percent prompted speculation the Federal Reserve will maintain a loose monetary policy.
“The employment data is positive for the stock market as that means monetary relaxation will continue,” said Tomochika Kitaoka, chief strategist in Tokyo at Mizuho Financial Group Inc. “Doubts will be eliminated that Japanese companies will post higher profits this fiscal year.”
Japan’s Nikkei 225 Stock Average fell 0.3 percent to 9,674.99. Australia’s S&P/ASX 200 Index rallied 1.4 percent, buoyed by Commonwealth Bank of Australia’s report of A$1.4 billion ($1.3 billion) in first-quarter profit.
U.S. Unemployment
U.S. stock futures were little-changed. The S&P 500 climbed on Nov. 6 after ratings of General Electric Co. and Macy’s Inc. were lifted. The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, a Labor Department report showed.
The MSCI Asia Pacific Index has climbed 65 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Olympus lost 3.9 percent to 2,745 yen. Nissan declined 2.6 percent to 639 yen.
The yen rallied to as high as 89.62 versus the dollar on Nov. 6 following the unemployment report. That compared with 90.64 at the close of stock trading in Tokyo that day.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net;
Britain and U.S. Clash at G-20 on Tax to Insure Against Crises
ST. ANDREWS, Scotland — The United States and Britain voiced disagreement Saturday over a proposal that would impose a new tax on financial transactions to support future bank rescues.
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Times Topics: Group of 20
Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability.
But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions. Later he seemed to soften his position, saying it would be up to the I.M.F. to present a range of possible measures.
“We want to make sure that we don’t put the taxpayer in a position of having to absorb the costs of a crisis in the future,” Mr. Geithner said after the Sky News interview. “I’m sure the I.M.F. will come up with some proposals.”
The Russian finance minister, Alexei Kudrin, also said he was skeptical of such a tax. Similar fees had been proposed by Germany and France but rejected by Mr. Brown’s government in the past as too difficult to manage. But Mr. Brown is now suggesting “an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transaction levy.”
Supporters of a tax had argued that it would reduce the volatility of markets; opponents said it would be too complex to enact across borders and could create huge imbalances. Mr. Brown said any such tax would have to be applied universally.
“It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Mr. Brown said at the summit. “There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.”
At the meeting at the Scottish golf resort, the last to be hosted by Britain during its turn leading the group, the ministers agreed on a detailed timetable to achieve balanced economic growth and reiterated a pledge not to withdraw any economic stimulus until a recovery was certain.
They also committed to enact limits on bonuses and force banks to hold more cash reserves. But they failed to reach an agreement on how to finance a new climate change deal ahead of a crucial meeting in Copenhagen next month.
The finance ministers agreed that economic and financial conditions had improved but that the recovery was “uneven and remains dependent on policy support,” according to a statement released by the group. The weak condition of the economy was illustrated Friday by new data showing the unemployment rate in the United States rising to 10.2 percent in October, the highest level in 26 years.
The finance ministers also acknowledged that withdrawing stimulus packages required a balancing act to avoid stifling the economic recovery that has just begun.
“If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater,” Mr. Geithner said. “It is too early to start to lean against recovery.”
As part of the group’s global recovery plan, the United States would aim to increase its savings rate and reduce its trade deficit while countries like China and Germany would reduce their dependence on exports. Economic imbalances were widely faulted as helping to bring about the global economic downturn.
Mr. Geithner acknowledged on Saturday that the changes would take time but that “what we are seeing so far has been encouraging.”
Skip to next paragraph
Related
Times Topics: Group of 20
Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability.
But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions. Later he seemed to soften his position, saying it would be up to the I.M.F. to present a range of possible measures.
“We want to make sure that we don’t put the taxpayer in a position of having to absorb the costs of a crisis in the future,” Mr. Geithner said after the Sky News interview. “I’m sure the I.M.F. will come up with some proposals.”
The Russian finance minister, Alexei Kudrin, also said he was skeptical of such a tax. Similar fees had been proposed by Germany and France but rejected by Mr. Brown’s government in the past as too difficult to manage. But Mr. Brown is now suggesting “an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transaction levy.”
Supporters of a tax had argued that it would reduce the volatility of markets; opponents said it would be too complex to enact across borders and could create huge imbalances. Mr. Brown said any such tax would have to be applied universally.
“It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Mr. Brown said at the summit. “There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.”
At the meeting at the Scottish golf resort, the last to be hosted by Britain during its turn leading the group, the ministers agreed on a detailed timetable to achieve balanced economic growth and reiterated a pledge not to withdraw any economic stimulus until a recovery was certain.
They also committed to enact limits on bonuses and force banks to hold more cash reserves. But they failed to reach an agreement on how to finance a new climate change deal ahead of a crucial meeting in Copenhagen next month.
The finance ministers agreed that economic and financial conditions had improved but that the recovery was “uneven and remains dependent on policy support,” according to a statement released by the group. The weak condition of the economy was illustrated Friday by new data showing the unemployment rate in the United States rising to 10.2 percent in October, the highest level in 26 years.
The finance ministers also acknowledged that withdrawing stimulus packages required a balancing act to avoid stifling the economic recovery that has just begun.
“If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater,” Mr. Geithner said. “It is too early to start to lean against recovery.”
As part of the group’s global recovery plan, the United States would aim to increase its savings rate and reduce its trade deficit while countries like China and Germany would reduce their dependence on exports. Economic imbalances were widely faulted as helping to bring about the global economic downturn.
Mr. Geithner acknowledged on Saturday that the changes would take time but that “what we are seeing so far has been encouraging.”
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