Lucky Charms. Froot Loops. Cocoa Pebbles. A ConAgra frozen dinner with corn dog and fries. McDonald’s Happy Meals.
These foods might make a nutritionist cringe, but all of them have been identified by food companies as healthy choices they can advertise to children under a three-year-old initiative by the food industry to fight childhood obesity.
Now a hard-nosed effort by the federal government to forge tougher advertising standards that favor more healthful products has become stalled amid industry opposition and deep divisions among regulators.
A report to Congress from several federal agencies — expected to include strict nutritional definitions for the sorts of foods that could be advertised to children — is overdue, and officials say it could be months before it is ready. Some advocates fear the delay could result in the measure being stripped of its toughest provisions.
“All of a sudden everything is dead in the water,” said Dale Kunkel, a communications professor at the University of Arizona who is an expert on children’s advertising. “I have heard no arguments to slow this down other than that the industry doesn’t like it.”
Among the requirements under consideration and included in a preliminary proposal by the agencies: Cereals could have only eight grams of sugar per serving, far less than many cereals that are heavily advertised to children (Lucky Charms and Cocoa Pebbles have 11 grams and Froot Loops has 12). The level for saturated fats would be set so low it would exclude peanut butter. And to qualify for advertising, all foods would have to contain significant amounts of wholesome ingredients like whole grains, low-fat milk, fruits or vegetables.
Critics have long complained that standards used by food manufacturers to designate healthy foods suitable for advertising to children are flawed, with ads for foods high in calories, fat, sugar and salt remaining a prominent part of the Saturday morning ritual on television. The Obama administration, as part of its campaign against childhood obesity, has also called on food companies to do more to ensure that advertising aimed at children is for healthier products.
The federal involvement took a step forward last year when Congress ordered the Federal Trade Commission, the Food and Drug Administration, the Agriculture Department and the Centers for Disease Control and Prevention to recommend standards for children’s food advertising.
The agencies released the preliminary proposal in December. It was far tougher than many had anticipated; advocates applauded but the food and advertising industries gave it a swift thumbs-down.
“The proposal was extraordinarily restrictive and would virtually end all food advertising as it’s currently carried out to kids under 18 years of age,” said Dan Jaffe, executive vice president for government regulations of the Association of National Advertisers, which represents companies that advertise their products.
Mr. Jaffe said he saw the delay in submitting the final report to Congress as a good sign, suggesting that changes were in the works.
The report was expected last week. Betsy Lordan, a spokeswoman for the Federal Trade Commission, said she could not predict when it would be finished. She said the agencies would first release their plan for public comment before submitting it to Congress.
The far-reaching preliminary proposal — and the resistance it encountered — appear to have put the agencies in a bind and created divisions among them, with some federal officials wanting to step back and take a more measured approach.
Restrictions on advertising are problematic in any event, in large part because of free speech issues.
To avoid a showdown, the Federal Trade Commission has said it wants the food and advertising industries to voluntarily accept changes. But the preliminary proposal would have to be substantially modified to gain industry support — and such changes would undoubtedly lead to charges that the government had backed down under pressure.
“With obesity rates the way they are, it’s no longer acceptable for companies to be marketing foods to kids that contribute to obesity and heart disease and other health problems,” said Margo G. Wootan, director of nutrition policy of the Center for Science in the Public Interest, an advocacy group.
At the middle of the debate are questions about the industry’s effort to take steps on its own to improve the way it advertises food to children.
The effort, called the Children’s Food and Beverage Advertising Initiative, began in mid-2007 and now involves 16 large companies that account for about three-quarters of the food and beverage ads on children’s television.
Under the initiative, which is run by the Better Business Bureau, each company sets nutritional criteria for foods it considers suitable to advertise.
The companies agree to feature only foods that meet those criteria in ads that appear during programming predominantly aimed at children under 12, like Saturday morning cartoons or certain time slots on the Nickelodeon network. The pledge also applies to some print advertising and Web sites intended for use by young children.
But critics say the nutritional standards the companies chose are too loose.
Kellogg’s standards allow it to advertise cereals that are high in sugar, like Froot Loops and Frosted Flakes, to young children. They also allow marketing for a candy called Yogos, which has sugar as its main ingredient.
Celeste A. Clark, the senior vice president for global nutrition at Kellogg, said in an e-mail message that the company’s cereals provided nutrients children need. Asked why candy qualified as a healthy choice for children, Dr. Clark said, “We believe that with balance and moderation all foods can have a place in the diet.”
McDonald’s and Burger King justify ads for their Happy Meals and Kids Meals by pledging to show lower-calorie versions of the meals in the ads. Those include apple slices instead of French fries and low-fat milk or fruit juice instead of soda. But critics point out that images of those products often appear fleetingly in ads that emphasize movie tie-ins and toy giveaways, and that children might not realize they are being encouraged to choose them because they are healthier.
McDonald’s said in a statement: “Any fair and objective review of our menu and the actions we’ve taken will demonstrate we’ve been responsible, we’re committed to children’s well-being, and we’ll continue to do more.”
Elaine D. Kolish, the industry initiative’s director, said that the program had improved the types of foods featured in children’s advertising and that companies had reformulated dozens of products to reduce sugar, salt and calories.
Four participants in the program, Cadbury, Coca-Cola, Hershey and Mars, have agreed not to aim any advertising to children under 12.
Ms. Kolish said the initiative had been getting more rigorous, with companies increasing the types of marketing covered to include things like computer games and cellphone ads.
“It’s moving the needle,” she said. “We’re not saying things are perfect yet. There’s still room for further growth, but it’s making a difference.”
Friday, July 23, 2010
Indian groups offer best rates
Indian banks now offer the highest savings rates in the UK, following the failure of previous top-payers from Iceland and Ireland in the credit crisis.
Indian deposit-takers head the “best-buy” tables for fixed-rate savings bonds, which give higher returns to savers prepared to tie up their money for one to five years.
The top rate of 4.9 per cent, fixed for five years, is from Bank of Baroda, India’s fourth biggest deposit-taker, beating the highest rate from a UK banking brand of 4.56 per cent. By contrast, with the base rate just 0.5 per cent, the best instant access rates from any bank are below 3 per cent.
Bank of Baroda, which has nine branches in the UK, predominantly serving British Asians, this week started online sales of savings bonds through Moneysupermarket.com, the comparison service.
Other large Indian banks – including State Bank of India, ICICI and Punjab National Bank – have successfully attracted UK deposits in recent years.
Sukhdev Sharma, managing director of Punjab National Bank (International), which offers the highest fixed savings rates for one - and two-year terms (up to 4 per cent), said: “The credibility of Indian banks has gone up in the year or two since the crisis.”
Deposits of up to £50,000 with these banks’ UK arms are covered by the UK’s Financial Services Compensation Scheme, giving savers the same protection as they have with a traditional high street name.
Subhash Mundra, chief executive of Bank of Baroda UK, added that savers had the reassurance that State Bank, Punjab and Baroda are all majority-owned by the Indian state.
“So the logic of a bank going down would be a government default,” he said.
He estimated that Indian banks held more than £5bn of UK deposits – equivalent to the savings book of one of the bigger building societies.
“We’re certainly ahead of the Chinese banks in the UK,” he said.
Indian deposit-takers head the “best-buy” tables for fixed-rate savings bonds, which give higher returns to savers prepared to tie up their money for one to five years.
The top rate of 4.9 per cent, fixed for five years, is from Bank of Baroda, India’s fourth biggest deposit-taker, beating the highest rate from a UK banking brand of 4.56 per cent. By contrast, with the base rate just 0.5 per cent, the best instant access rates from any bank are below 3 per cent.
Bank of Baroda, which has nine branches in the UK, predominantly serving British Asians, this week started online sales of savings bonds through Moneysupermarket.com, the comparison service.
Other large Indian banks – including State Bank of India, ICICI and Punjab National Bank – have successfully attracted UK deposits in recent years.
Sukhdev Sharma, managing director of Punjab National Bank (International), which offers the highest fixed savings rates for one - and two-year terms (up to 4 per cent), said: “The credibility of Indian banks has gone up in the year or two since the crisis.”
Deposits of up to £50,000 with these banks’ UK arms are covered by the UK’s Financial Services Compensation Scheme, giving savers the same protection as they have with a traditional high street name.
Subhash Mundra, chief executive of Bank of Baroda UK, added that savers had the reassurance that State Bank, Punjab and Baroda are all majority-owned by the Indian state.
“So the logic of a bank going down would be a government default,” he said.
He estimated that Indian banks held more than £5bn of UK deposits – equivalent to the savings book of one of the bigger building societies.
“We’re certainly ahead of the Chinese banks in the UK,” he said.
Asian Stocks Rise for Third Week on Commodities, Profit Outlook
July 24 (Bloomberg) -- Asian stocks rose for a third week as commodity prices gained and as U.S. companies reported or raised profit forecasts, boosting confidence in the strength of global economic growth.
BHP Billiton Ltd., the world’s largest mining company, climbed 4 percent this week in Sydney. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, gained 3.7 percent in Taipei after Microsoft Corp. reported positive earnings in the U.S. China Resources Land Ltd., a state-controlled developer, soared 6.4 percent in Hong Kong on speculation China may ease tightening measures.
The MSCI Asia Pacific Index climbed 1.0 percent, advancing for a third-straight week and posting the longest winning streak since the week ended April 16. The gauge has slumped 8.5 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will slow global growth.
“Sentiment has been improving after the better-than- expected U.S. earnings eased investors’ concerns about a poor economic outlook,” said Michiya Tomita, a Hong Kong-based fund manager for Mitsubishi UFJ Asset Management Co., which oversees $64 billion.
Hong Kong’s Hang Seng Index rose 2.8 percent this week as the city’s developers gained on prospects of higher property prices. China’s Shanghai Composite Index climbed 6.1 percent. South Korea’s Kospi Index increased 1.1 percent. Australia’s S&P/ASX 200 Index rose 0.8 percent, led by materials companies. Japan’s Nikkei 225 Stock Average advanced 0.2 percent in a four- day, holiday-shortened week.
Materials Stocks Advance
A gauge of material companies gained the most this week among the 10 industry groups in the MSCI Asia Pacific Index, followed by energy companies.
BHP Billiton climbed 4 percent to A$39.68 this week in Sydney, while Rio Tinto Group, the world’s third-biggest mining company, jumped 6.2 percent to A$69.86. Sumitomo Metal Mining Co., Japan’s largest nickel producer, climbed 4.8 percent to 1,130 yen in Tokyo. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, surged 7 percent to HK$6.59 in Hong Kong.
The London Metals Exchange Index, a measure of six metals, rose 7.0 percent this week, while copper futures for September delivery jumped 8.7 percent in New York after a report showed sales of previously owned U.S. homes fell less than forecast in June, bolstering the demand outlook for the metal. Crude oil for September delivery climbed 3.2 percent.
Hon Hai Increases
Microsoft, the world’s largest software maker, reported on July 22 a 48 percent climb in fourth-quarter net income, exceeding the average analyst estimate in a Bloomberg survey. Separately, California-based company Apple Inc. forecast fourth- quarter sales that topped analysts’ estimates.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand.”
Hon Hai Precision Industry gained 3.7 percent to NT$125 this week in Taipei. Samsung Electronics Co., Asia’s biggest maker of computer chips, flat screens and mobile phones, increased 1.1 percent to 811,000 won in Seoul. James Hardie Industries SE, the biggest seller of home siding in the U.S., gained 2.6 percent to A$6.37 in Sydney.
China Policy Speculation
Property developers rose this week on speculation China’s government will soon end policies to cool the housing market. Donald Straszheim, a senior managing director for China research at International Strategy & Investment Group, said China will “back away” from its tightening policies in the housing market within three months as the economy faces a bigger risk from a slowdown than inflation.
China Resources Land jumped 6.4 percent to HK$16.62 in Hong Kong. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, surged 13 percent to HK$12.34. China Vanke Co., the country’s largest listed developer, climbed 11 percent to 9.86 yuan in the southern city of Shenzhen.
“What the market is betting now is that the government will allow the current tightening measures to be relaxed going forward,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai.
BHP Billiton Ltd., the world’s largest mining company, climbed 4 percent this week in Sydney. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, gained 3.7 percent in Taipei after Microsoft Corp. reported positive earnings in the U.S. China Resources Land Ltd., a state-controlled developer, soared 6.4 percent in Hong Kong on speculation China may ease tightening measures.
The MSCI Asia Pacific Index climbed 1.0 percent, advancing for a third-straight week and posting the longest winning streak since the week ended April 16. The gauge has slumped 8.5 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will slow global growth.
“Sentiment has been improving after the better-than- expected U.S. earnings eased investors’ concerns about a poor economic outlook,” said Michiya Tomita, a Hong Kong-based fund manager for Mitsubishi UFJ Asset Management Co., which oversees $64 billion.
Hong Kong’s Hang Seng Index rose 2.8 percent this week as the city’s developers gained on prospects of higher property prices. China’s Shanghai Composite Index climbed 6.1 percent. South Korea’s Kospi Index increased 1.1 percent. Australia’s S&P/ASX 200 Index rose 0.8 percent, led by materials companies. Japan’s Nikkei 225 Stock Average advanced 0.2 percent in a four- day, holiday-shortened week.
Materials Stocks Advance
A gauge of material companies gained the most this week among the 10 industry groups in the MSCI Asia Pacific Index, followed by energy companies.
BHP Billiton climbed 4 percent to A$39.68 this week in Sydney, while Rio Tinto Group, the world’s third-biggest mining company, jumped 6.2 percent to A$69.86. Sumitomo Metal Mining Co., Japan’s largest nickel producer, climbed 4.8 percent to 1,130 yen in Tokyo. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, surged 7 percent to HK$6.59 in Hong Kong.
The London Metals Exchange Index, a measure of six metals, rose 7.0 percent this week, while copper futures for September delivery jumped 8.7 percent in New York after a report showed sales of previously owned U.S. homes fell less than forecast in June, bolstering the demand outlook for the metal. Crude oil for September delivery climbed 3.2 percent.
Hon Hai Increases
Microsoft, the world’s largest software maker, reported on July 22 a 48 percent climb in fourth-quarter net income, exceeding the average analyst estimate in a Bloomberg survey. Separately, California-based company Apple Inc. forecast fourth- quarter sales that topped analysts’ estimates.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand.”
Hon Hai Precision Industry gained 3.7 percent to NT$125 this week in Taipei. Samsung Electronics Co., Asia’s biggest maker of computer chips, flat screens and mobile phones, increased 1.1 percent to 811,000 won in Seoul. James Hardie Industries SE, the biggest seller of home siding in the U.S., gained 2.6 percent to A$6.37 in Sydney.
China Policy Speculation
Property developers rose this week on speculation China’s government will soon end policies to cool the housing market. Donald Straszheim, a senior managing director for China research at International Strategy & Investment Group, said China will “back away” from its tightening policies in the housing market within three months as the economy faces a bigger risk from a slowdown than inflation.
China Resources Land jumped 6.4 percent to HK$16.62 in Hong Kong. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, surged 13 percent to HK$12.34. China Vanke Co., the country’s largest listed developer, climbed 11 percent to 9.86 yuan in the southern city of Shenzhen.
“What the market is betting now is that the government will allow the current tightening measures to be relaxed going forward,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai.
Cameron seeks Indian military contracts
David Cameron will seek next week to sell Hawk jets and design plans for aircraft carriers to India, as he leads a clutch of cabinet ministers on a trade mission to the subcontinent.
Defence exports will be one of the most concrete and contentious manifestations of the “special partnership” Mr Cameron wants to forge with a rising power that he feels Britain has neglected for too long.
The prime minister is to travel with seven cabinet ministers – including the foreign secretary, chancellor and business secretary – in an effort to revitalise ties with New Delhi and to generate business in the insurance, financial services and technology sectors.
But the most immediate big deals may come in defence. BAE hopes to sign a deal worth up to £500m to supply about 60 more Hawk trainer jets, building on an established partnership with Hindustan Aeronautics Ltd (HAL), the state-run defence company.
India ordered 66 Hawk jets from BAE in 2004 at a £1bn cost. All the aircraft in the follow-up deal are likely to be built by HAL.
The model for technology transfer and joint manufacturing could also be extended to UK aircraft carriers. Senior defence figures believe the Indians may be interested in buying designs or specific technologies, in a deal that would advance the country’s shipbuilding capacity.
Other potential defence equipment offers on the British stall include the Type-26 frigate, the “future surface combatant”, which BAE Systems would seek to sell in “modular form” once its design is complete.
The UK company has been seeking shipbuilding opportunities as India’s navy has sought to expand its fleet from its own dockyards rather than buying warships from other navies.
BAE already has an armoured vehicle and artillery joint venture with Mahindra & Mahindra, the truck maker.
Mr Cameron’s team will also seek to press British interests in India’s $11bn (£7.1bn), 126-aircraft fighter procurement contest. Six manufacturers are in the running, with EADS, the consortium that includes BAE Systems, offering the Eurofighter Typhoon jet.
While the Indian government is keen to develop its defence industrial base, it continues to source about 70 per cent of its equipment from foreign suppliers.
Defence exports will be one of the most concrete and contentious manifestations of the “special partnership” Mr Cameron wants to forge with a rising power that he feels Britain has neglected for too long.
The prime minister is to travel with seven cabinet ministers – including the foreign secretary, chancellor and business secretary – in an effort to revitalise ties with New Delhi and to generate business in the insurance, financial services and technology sectors.
But the most immediate big deals may come in defence. BAE hopes to sign a deal worth up to £500m to supply about 60 more Hawk trainer jets, building on an established partnership with Hindustan Aeronautics Ltd (HAL), the state-run defence company.
India ordered 66 Hawk jets from BAE in 2004 at a £1bn cost. All the aircraft in the follow-up deal are likely to be built by HAL.
The model for technology transfer and joint manufacturing could also be extended to UK aircraft carriers. Senior defence figures believe the Indians may be interested in buying designs or specific technologies, in a deal that would advance the country’s shipbuilding capacity.
Other potential defence equipment offers on the British stall include the Type-26 frigate, the “future surface combatant”, which BAE Systems would seek to sell in “modular form” once its design is complete.
The UK company has been seeking shipbuilding opportunities as India’s navy has sought to expand its fleet from its own dockyards rather than buying warships from other navies.
BAE already has an armoured vehicle and artillery joint venture with Mahindra & Mahindra, the truck maker.
Mr Cameron’s team will also seek to press British interests in India’s $11bn (£7.1bn), 126-aircraft fighter procurement contest. Six manufacturers are in the running, with EADS, the consortium that includes BAE Systems, offering the Eurofighter Typhoon jet.
While the Indian government is keen to develop its defence industrial base, it continues to source about 70 per cent of its equipment from foreign suppliers.
Thursday, July 22, 2010
Top Banks Paid $1.6 Billion in Excessive Bonuses, U.S. Finds
With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.
Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.
Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.
As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.
Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.
On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.
If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.
“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.
Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.
The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.
Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.
Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.
Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.
The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.
Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.
Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.
Mr. Feinberg is not expected to name individual executives who received the highest awards.
His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.
European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.
Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.
Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.
As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.
Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.
On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.
If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.
“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.
Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.
The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.
Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.
Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.
Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.
The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.
Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.
Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.
Mr. Feinberg is not expected to name individual executives who received the highest awards.
His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.
European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.
Asian Stocks Rise, Corporate Bond Risk Falls on Profit, Economy
July 23 (Bloomberg) -- Asian stocks rose the most in more than a week and a measure of corporate bond risk fell to the lowest in a month after companies boosted profit forecasts and growth accelerated in European manufacturing and services.
The MSCI Asia Pacific Index gained 1.4 percent to 117.17 at 11:45 a.m. in Tokyo. Oil traded at $79.14 a barrel, near an 11- week high. Futures on the Standard & Poor’s 500 Index increased 0.1 percent after the index soared 2.3 percent yesterday.
U.S. equities jumped the most in more than two weeks yesterday after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased forecasts. Microsoft Corp. reported its biggest sales gain in 2 1/2 years, and Japan’s Komatsu Inc. said it may raise its earnings estimates. Financial companies contributed to the gain in Asian stocks today ahead of the publication of tests on the strength of European banks.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion in Hong Kong at Hamon Asset Management Ltd. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand in the second half.”
Japan’s Nikkei 225 Stock Average gained 1.8 percent, the biggest advance among benchmark equity indexes in the Asia- Pacific region, followed by Australia’s S&P/ASX 200 Index’s 1.6 percent increase. Taiwan’s Taiex index climbed 1.3 percent, the most in more than a week, on a rally in technology shares.
Canon, Asustek Climb
Canon Inc., a camera maker that counts Europe and the Americas as its biggest markets, jumped 2.9 percent in Tokyo. Laptop computer supplier Acer Inc. advanced 1.3 percent and Asustek Computer Inc., a maker of low-cost personal computers, climbed 2.3 percent after Microsoft reported sales.
BHP Billiton Ltd. and Rio Tinto Group, the world’s No. 1 and No. 3 mining companies, jumped at least 1.7 percent in Sydney after oil and metals prices rose yesterday.
Asian bond risk fell. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 121 basis points, the lowest since June 21, ICAP Plc and CMA prices show. The indexes track credit-default swaps, which are used to insure against missed debt payments.
The Markit iTraxx Australia index fell 4 basis points to 120 basis points, the lowest since June 22, according to Nomura Holdings Inc. and CMA.
Crude oil traded near an 11-week high after rising on optimism fuel demand will increase amid improved prospects for an economic recovery. Crude for September delivery was at $79.13 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange. The contract rose $2.74 to $79.30 yesterday, the highest settlement since May 5 and biggest increase since May 27.
The MSCI Asia Pacific Index gained 1.4 percent to 117.17 at 11:45 a.m. in Tokyo. Oil traded at $79.14 a barrel, near an 11- week high. Futures on the Standard & Poor’s 500 Index increased 0.1 percent after the index soared 2.3 percent yesterday.
U.S. equities jumped the most in more than two weeks yesterday after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased forecasts. Microsoft Corp. reported its biggest sales gain in 2 1/2 years, and Japan’s Komatsu Inc. said it may raise its earnings estimates. Financial companies contributed to the gain in Asian stocks today ahead of the publication of tests on the strength of European banks.
“Microsoft’s earnings reiterated that demand for electronics in the second half is still positive,” said Monika Yang, who helps oversee $2 billion in Hong Kong at Hamon Asset Management Ltd. “This is a boost to Asian stock sentiment as it stops the earlier noises about possible weak demand in the second half.”
Japan’s Nikkei 225 Stock Average gained 1.8 percent, the biggest advance among benchmark equity indexes in the Asia- Pacific region, followed by Australia’s S&P/ASX 200 Index’s 1.6 percent increase. Taiwan’s Taiex index climbed 1.3 percent, the most in more than a week, on a rally in technology shares.
Canon, Asustek Climb
Canon Inc., a camera maker that counts Europe and the Americas as its biggest markets, jumped 2.9 percent in Tokyo. Laptop computer supplier Acer Inc. advanced 1.3 percent and Asustek Computer Inc., a maker of low-cost personal computers, climbed 2.3 percent after Microsoft reported sales.
BHP Billiton Ltd. and Rio Tinto Group, the world’s No. 1 and No. 3 mining companies, jumped at least 1.7 percent in Sydney after oil and metals prices rose yesterday.
Asian bond risk fell. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 121 basis points, the lowest since June 21, ICAP Plc and CMA prices show. The indexes track credit-default swaps, which are used to insure against missed debt payments.
The Markit iTraxx Australia index fell 4 basis points to 120 basis points, the lowest since June 22, according to Nomura Holdings Inc. and CMA.
Crude oil traded near an 11-week high after rising on optimism fuel demand will increase amid improved prospects for an economic recovery. Crude for September delivery was at $79.13 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange. The contract rose $2.74 to $79.30 yesterday, the highest settlement since May 5 and biggest increase since May 27.
ONGC in BP talks over Vietnam assets
India’s largest oil group is in talks with BP to buy its Vietnamese assets as the UK company works towards the $10bn of sales it has targeted in the wake of the Gulf of Mexico oil spill.
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Thursday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also be discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team ... the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Thursday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also be discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team ... the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest
Wednesday, July 21, 2010
Yen Rises as Bernanke Damps Recovery Optimism; Stocks Decline
July 22 (Bloomberg) -- The yen approached a seven-month high against the dollar and Asian stocks fell after Federal Reserve Chairman Ben S. Bernanke said the outlook for the world’s largest economy remains “unusually uncertain.”
The MSCI Asia Pacific Index of shares was 0.2 percent lower at 115.41 as of 11:35 a.m. in Tokyo. Japanese exporters led the Nikkei 225 Stock Average’s slide to a three-week low as the yen strengthened against all 16 major currencies. The yield on the two-year Treasury reached a record-low 0.55 percent, while futures on the Standard & Poor’s 500 Index were little changed.
“Markets hate uncertainty and the reaction in global markets is to sell risky assets,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The yen is likely to benefit from risk aversion.”
Bernanke said the Fed is prepared “to take further policy actions as needed” to lift growth in U.S., commenting before reports today are forecast to show initial jobless claims increased and existing home sales dropped. The euro fell to the lowest level in more than a week against the yen before results of European banks’ stress tests are revealed tomorrow.
The yen touched 86.57 per dollar before trading at 86.58, from 87.05 late yesterday in New York. It reached 86.27 on July 16, the strongest level since Dec. 1. The Nikkei 225 dropped 0.7 percent to 9,215.30, sliding for a fifth day.
Exporters Slide
Canon Inc., a camera maker that gets 27 percent of sales in the Americas, fell 1.2 percent to 3,315 yen. Honda Motor Co., which generates 42 percent of revenue in North America, lost 1.1 percent to 2,572 yen. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, dropped 0.9 percent to 810,000 won in Seoul.
“The Bernanke testimony disappointed people,” said Mitsushige Akino, who oversees $450 million Tokyo at Ichiyoshi Investment Management Co.
The S&P 500 Index dropped 1.3 percent yesterday after Bernanke delivered his semiannual report on monetary policy to the Senate Banking Committee. He testifies to the House Financial Services Committee today.
Initial jobless claims in the U.S. rose to 445,000 last week from 429,000 the prior period, according to the median forecast of economists surveyed by Bloomberg before today’s Labor Department report. Existing home sales dropped 9.9 percent in June, the most this year, a separate survey showed ahead of a release from the National Association of Realtors.
Copper led declines among metals prices on concern the global economic recovery is losing steam, with the three-month futures contract sliding as much as 1.6 percent to $6,752 a metric ton. The price of the metal jumped 3.3 percent yesterday, the most in two months.
“Market sentiment today has been affected by Bernanke’s comments,” Liu Xu, an analyst at China International Futures Co., said from Shenzhen. “It’s a good excuse to take profit.”
The MSCI Asia Pacific Index of shares was 0.2 percent lower at 115.41 as of 11:35 a.m. in Tokyo. Japanese exporters led the Nikkei 225 Stock Average’s slide to a three-week low as the yen strengthened against all 16 major currencies. The yield on the two-year Treasury reached a record-low 0.55 percent, while futures on the Standard & Poor’s 500 Index were little changed.
“Markets hate uncertainty and the reaction in global markets is to sell risky assets,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The yen is likely to benefit from risk aversion.”
Bernanke said the Fed is prepared “to take further policy actions as needed” to lift growth in U.S., commenting before reports today are forecast to show initial jobless claims increased and existing home sales dropped. The euro fell to the lowest level in more than a week against the yen before results of European banks’ stress tests are revealed tomorrow.
The yen touched 86.57 per dollar before trading at 86.58, from 87.05 late yesterday in New York. It reached 86.27 on July 16, the strongest level since Dec. 1. The Nikkei 225 dropped 0.7 percent to 9,215.30, sliding for a fifth day.
Exporters Slide
Canon Inc., a camera maker that gets 27 percent of sales in the Americas, fell 1.2 percent to 3,315 yen. Honda Motor Co., which generates 42 percent of revenue in North America, lost 1.1 percent to 2,572 yen. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, dropped 0.9 percent to 810,000 won in Seoul.
“The Bernanke testimony disappointed people,” said Mitsushige Akino, who oversees $450 million Tokyo at Ichiyoshi Investment Management Co.
The S&P 500 Index dropped 1.3 percent yesterday after Bernanke delivered his semiannual report on monetary policy to the Senate Banking Committee. He testifies to the House Financial Services Committee today.
Initial jobless claims in the U.S. rose to 445,000 last week from 429,000 the prior period, according to the median forecast of economists surveyed by Bloomberg before today’s Labor Department report. Existing home sales dropped 9.9 percent in June, the most this year, a separate survey showed ahead of a release from the National Association of Realtors.
Copper led declines among metals prices on concern the global economic recovery is losing steam, with the three-month futures contract sliding as much as 1.6 percent to $6,752 a metric ton. The price of the metal jumped 3.3 percent yesterday, the most in two months.
“Market sentiment today has been affected by Bernanke’s comments,” Liu Xu, an analyst at China International Futures Co., said from Shenzhen. “It’s a good excuse to take profit.”
Hope Against Hepatitis C
New medicines are being developed that are expected to transform the care of patients with hepatitis C, making treatment far more effective and far less grueling.
Betty Stevenson, a hepatitis C patient and former heroin addict, speaking about how the Oasis program helped save her life.
The new drugs, which could start reaching the market as early as next year, could help subdue a virus that infects roughly four million Americans, most of them baby boomers, and 170 million people worldwide.
“I almost think this will be revolutionary, to be honest,” said Dr. Fred Poordad, chief of hepatology at Cedars-Sinai Medical Center in Los Angeles. “We are chomping at the bit to try to treat as many patients as we can.”
About two dozen pharmaceutical companies are now pursuing drugs for hepatitis C, which an executive at Vertex Pharmaceuticals recently called “one of the largest pharmaceutical opportunities this decade.”
That is because the toll of the disease, which now kills about 12,000 Americans a year, is expected to rise in the coming decade. Although new cases have dropped sharply, hundreds of thousands of people who were infected decades ago are expected to start experiencing the effects of liver damage.
New cases of liver cancer are already rising year by year. And hepatitis C is the leading cause of liver transplants, like the one recently received by the rock musician Gregg Allman.
Hopes for new treatments were buoyed in May by the first results from a late-stage clinical trial of one of the new drugs, telaprevir from Vertex. When added to the existing treatment — a combination of alpha interferon and ribavirin — telaprevir effectively cured 75 percent of patients, compared with 44 percent of those treated with the existing drugs alone. And for many patients, the course of treatment could be halved to 24 weeks.
Dr. Poordad, who is a consultant to some of the pharmaceutical companies, said that one-fifth of his patients were being “warehoused,” meaning they were forgoing treatment now to wait for the new drugs.
But even if the drugs do work, some experts and doctors warn that this virus may be particularly tough to vanquish. Three-quarters of the people who are infected do not know it because they are not tested for the virus and because the infection can be asymptomatic for years while it stealthily attacks the liver.
And because this disease is transmitted by blood, those infected largely are former or current IV-drug users — a population that characteristically has little or no health insurance — who may not be the most able to stick to a lengthy treatment regimen that can cause brutal side effects.
Pharmaceutical companies “completely ignore the real face of hepatitis C,” said Dr. Diana L. Sylvestre, who runs a clinic in Oakland, Calif., that treats drug addicts and former addicts with hepatitis C. “A minority of patients who have hepatitis C will benefit from these drugs.”
When she gave a recent talk at Vertex, Dr. Sylvestre’s first slide showed a man in a suit, meant to be a Vertex executive, with his head in the sand.
Dr. Camilla Graham, a senior director of medical affairs at Vertex, said that addicts accounted for less than 10 percent of people with hepatitis C. While many people got infected by trying drugs in the 1960s and 1970s, they have long since kicked the habit, she said.
Hepatitis C can also be transmitted sexually, particularly when men have sex with other men. And many people got the virus from blood transfusions before 1992, when donated blood began being tested for the virus.
Nevertheless, pharmaceutical companies realize that difficulties getting patients screened and treated could limit the use of their drugs. So they are contributing to a groundswell of activism to raise awareness of what has long been known as a silent epidemic. Also contributing to the new advocacy is the highly organized H.I.V. community, since 15 to 30 percent of those with H.I.V. also have hepatitis C.
A report issued by the Institute of Medicine in January urged a new national strategy to improve prevention, detection and treatment of hepatitis C and hepatitis B, which also causes liver disease. A hepatitis task force created by the Department of Health and Human Services is preparing an action plan by October. The House Oversight and Government Reform Committee held a hearing on hepatitis last month.
Drug makers contribute to the National Viral Hepatitis Roundtable, which helped pay for the Institute of Medicine report, and several companies have banded together into the Corporate Hepatitis Alliance to lobby for more government funding. In January, several companies started the Viral Hepatitis Action Coalition, to help finance research at the Centers for Disease Control and Prevention.
Vertex has commissioned studies projecting a rising toll from hepatitis C. One such study, done by Milliman, a health insurance consulting firm, projected that the number of people with advanced liver disease from hepatitis C would quadruple in 20 years if treatment did not improve.
Screening people for hepatitis C should become easier. In June, the Food and Drug Administration approved a rapid blood test developed by OraSure Technologies that gives an answer in 20 minutes rather than several hours needed if the sample is sent to a lab. Future versions might use a mouth swab, allowing screening to be done at churches, street fairs and other gatherings.
There is a risk that increased screening could result in treatment for people who will never need it. Only 5 to 20 percent of people with chronic infection develop cirrhosis in about 20 to 30 years, and doctors cannot predict which patients those will be.
“I think the companies have done a superb job of marketing this disease,” said Dr. Ronald L. Koretz, emeritus professor of clinical medicine at the University of California, Los Angeles. Dr. Koretz said there was no good evidence that treatment made a difference since many patients cured by the drugs might never have developed serious problems anyway.
The current treatment for hepatitis C consists of weekly injections of alpha interferon — the leading brands are Roche’s Pegasys and Merck’s PegIntron — combined with ribavirin, a generic oral drug. It is not quite clear how these drugs work.
The regimen usually lasts either 24 or 48 weeks and costs more than $30,000. It can be rough, causing flulike symptoms, depression, anemia and other problems. And the treatment fails to cure the patient about half the time, either because it cannot clear the virus from the body or because the patient cannot tolerate the drugs.
The new drugs generally inhibit enzymes needed by the virus, a strategy that has worked well against H.I.V. The two drugs that could conceivably make it to the market by next year, Vertex’s telaprevir and Merck’s boceprevir, are both pills that inhibit the protease enzyme.
For a few years at least, the new drugs would have to be used along with interferon. But doctors are hopeful that starting perhaps in five years, combinations of the new pills will do away with the need for interferon.
The drugs could offer new hope to an estimated 300,000 people for whom the existing treatment has not worked. Some early data suggests that telaprevir, when combined with the existing drugs, could cure half of them.
“I was willing to try yesterday,” said Kenny C. Charles, 58, of Woodbourne, N.Y., who said he got hepatitis C from blood transfusions and had undergone four unsuccessful treatment attempts with the existing drugs. Now, he said, his liver was starting to show signs of cirrhosis, or scarring.
Some people with hemophilia, who were infected more than 25 years ago by blood-clotting drugs derived from human plasma, are pressing the Food and Drug Administration to allow them to be treated with combinations of the new drugs, without interferon, even before the new drugs are approved. The F.D.A. held a public hearing on the request in April and is now formulating a policy.
Mark Antell of Rosslyn, Va., one of the organizers of the petition, said he had to stop taking interferon because of flulike symptoms, loss of hair and creaking joints. “It was as though I was aging very rapidly,” he said.
Mr. Antell, 63, a retired Environmental Protection Agency employee, said hemophiliacs were typically not allowed into clinical trials to test the new drugs, so they needed another way to obtain them.
“I think there’s a lot of guys in my situation, and we don’t have a lot of time,” he said.
Betty Stevenson, a hepatitis C patient and former heroin addict, speaking about how the Oasis program helped save her life.
The new drugs, which could start reaching the market as early as next year, could help subdue a virus that infects roughly four million Americans, most of them baby boomers, and 170 million people worldwide.
“I almost think this will be revolutionary, to be honest,” said Dr. Fred Poordad, chief of hepatology at Cedars-Sinai Medical Center in Los Angeles. “We are chomping at the bit to try to treat as many patients as we can.”
About two dozen pharmaceutical companies are now pursuing drugs for hepatitis C, which an executive at Vertex Pharmaceuticals recently called “one of the largest pharmaceutical opportunities this decade.”
That is because the toll of the disease, which now kills about 12,000 Americans a year, is expected to rise in the coming decade. Although new cases have dropped sharply, hundreds of thousands of people who were infected decades ago are expected to start experiencing the effects of liver damage.
New cases of liver cancer are already rising year by year. And hepatitis C is the leading cause of liver transplants, like the one recently received by the rock musician Gregg Allman.
Hopes for new treatments were buoyed in May by the first results from a late-stage clinical trial of one of the new drugs, telaprevir from Vertex. When added to the existing treatment — a combination of alpha interferon and ribavirin — telaprevir effectively cured 75 percent of patients, compared with 44 percent of those treated with the existing drugs alone. And for many patients, the course of treatment could be halved to 24 weeks.
Dr. Poordad, who is a consultant to some of the pharmaceutical companies, said that one-fifth of his patients were being “warehoused,” meaning they were forgoing treatment now to wait for the new drugs.
But even if the drugs do work, some experts and doctors warn that this virus may be particularly tough to vanquish. Three-quarters of the people who are infected do not know it because they are not tested for the virus and because the infection can be asymptomatic for years while it stealthily attacks the liver.
And because this disease is transmitted by blood, those infected largely are former or current IV-drug users — a population that characteristically has little or no health insurance — who may not be the most able to stick to a lengthy treatment regimen that can cause brutal side effects.
Pharmaceutical companies “completely ignore the real face of hepatitis C,” said Dr. Diana L. Sylvestre, who runs a clinic in Oakland, Calif., that treats drug addicts and former addicts with hepatitis C. “A minority of patients who have hepatitis C will benefit from these drugs.”
When she gave a recent talk at Vertex, Dr. Sylvestre’s first slide showed a man in a suit, meant to be a Vertex executive, with his head in the sand.
Dr. Camilla Graham, a senior director of medical affairs at Vertex, said that addicts accounted for less than 10 percent of people with hepatitis C. While many people got infected by trying drugs in the 1960s and 1970s, they have long since kicked the habit, she said.
Hepatitis C can also be transmitted sexually, particularly when men have sex with other men. And many people got the virus from blood transfusions before 1992, when donated blood began being tested for the virus.
Nevertheless, pharmaceutical companies realize that difficulties getting patients screened and treated could limit the use of their drugs. So they are contributing to a groundswell of activism to raise awareness of what has long been known as a silent epidemic. Also contributing to the new advocacy is the highly organized H.I.V. community, since 15 to 30 percent of those with H.I.V. also have hepatitis C.
A report issued by the Institute of Medicine in January urged a new national strategy to improve prevention, detection and treatment of hepatitis C and hepatitis B, which also causes liver disease. A hepatitis task force created by the Department of Health and Human Services is preparing an action plan by October. The House Oversight and Government Reform Committee held a hearing on hepatitis last month.
Drug makers contribute to the National Viral Hepatitis Roundtable, which helped pay for the Institute of Medicine report, and several companies have banded together into the Corporate Hepatitis Alliance to lobby for more government funding. In January, several companies started the Viral Hepatitis Action Coalition, to help finance research at the Centers for Disease Control and Prevention.
Vertex has commissioned studies projecting a rising toll from hepatitis C. One such study, done by Milliman, a health insurance consulting firm, projected that the number of people with advanced liver disease from hepatitis C would quadruple in 20 years if treatment did not improve.
Screening people for hepatitis C should become easier. In June, the Food and Drug Administration approved a rapid blood test developed by OraSure Technologies that gives an answer in 20 minutes rather than several hours needed if the sample is sent to a lab. Future versions might use a mouth swab, allowing screening to be done at churches, street fairs and other gatherings.
There is a risk that increased screening could result in treatment for people who will never need it. Only 5 to 20 percent of people with chronic infection develop cirrhosis in about 20 to 30 years, and doctors cannot predict which patients those will be.
“I think the companies have done a superb job of marketing this disease,” said Dr. Ronald L. Koretz, emeritus professor of clinical medicine at the University of California, Los Angeles. Dr. Koretz said there was no good evidence that treatment made a difference since many patients cured by the drugs might never have developed serious problems anyway.
The current treatment for hepatitis C consists of weekly injections of alpha interferon — the leading brands are Roche’s Pegasys and Merck’s PegIntron — combined with ribavirin, a generic oral drug. It is not quite clear how these drugs work.
The regimen usually lasts either 24 or 48 weeks and costs more than $30,000. It can be rough, causing flulike symptoms, depression, anemia and other problems. And the treatment fails to cure the patient about half the time, either because it cannot clear the virus from the body or because the patient cannot tolerate the drugs.
The new drugs generally inhibit enzymes needed by the virus, a strategy that has worked well against H.I.V. The two drugs that could conceivably make it to the market by next year, Vertex’s telaprevir and Merck’s boceprevir, are both pills that inhibit the protease enzyme.
For a few years at least, the new drugs would have to be used along with interferon. But doctors are hopeful that starting perhaps in five years, combinations of the new pills will do away with the need for interferon.
The drugs could offer new hope to an estimated 300,000 people for whom the existing treatment has not worked. Some early data suggests that telaprevir, when combined with the existing drugs, could cure half of them.
“I was willing to try yesterday,” said Kenny C. Charles, 58, of Woodbourne, N.Y., who said he got hepatitis C from blood transfusions and had undergone four unsuccessful treatment attempts with the existing drugs. Now, he said, his liver was starting to show signs of cirrhosis, or scarring.
Some people with hemophilia, who were infected more than 25 years ago by blood-clotting drugs derived from human plasma, are pressing the Food and Drug Administration to allow them to be treated with combinations of the new drugs, without interferon, even before the new drugs are approved. The F.D.A. held a public hearing on the request in April and is now formulating a policy.
Mark Antell of Rosslyn, Va., one of the organizers of the petition, said he had to stop taking interferon because of flulike symptoms, loss of hair and creaking joints. “It was as though I was aging very rapidly,” he said.
Mr. Antell, 63, a retired Environmental Protection Agency employee, said hemophiliacs were typically not allowed into clinical trials to test the new drugs, so they needed another way to obtain them.
“I think there’s a lot of guys in my situation, and we don’t have a lot of time,” he said.
Henderson Has Analysts’ Backing Amid Lawmakers’ Ire
July 22 (Bloomberg) -- Henderson Land Development Co., the flagship company of Hong Kong’s second-richest man, has lost 20 percent of its market value this year as it became the focus of government efforts to curb property prices and police raided its offices. Now some analysts say it’s time to buy.
“Whatever the outcome, it’ll only be the tip of the iceberg compared to the sheer size of their business,” said Castor Pang, Hong Kong-based research director at Cinda International Holdings Ltd. “It won’t have much impact on the fundamentals.”
Henderson, founded by Lee Shau-kee in 1973, said in October it sold 24 luxury flats for as much as a record HK$88,000 a square foot. Eight months later, it said 20 of the sales fell through, sparking a government probe. The company has denied any wrongdoing.
The investigation may have tarnished the public image of the 82-year-old billionaire, though 17 of 25 analysts who cover Henderson rate the stock a “buy,” according to data compiled by Bloomberg. Lee has steered the company to buy land outside of government auctions, the main source of development plots in Hong Kong, to build a 40 million-square-foot (3.7 million- square-meter) landbank in the rural New Territories, the most among local developers.
“This controversy has no doubt dented their reputation and image,” Pang said.
The average 12-month price forecast of 20 analysts who provided targets is HK$58.24, 25 percent higher than the shares’ closing price yesterday. That’s the most bullish forecast among the seven developers in the Hang Seng Property Index.
Henderson shares rose 0.1 percent to HK$46.55 at 10:49 a.m. in Hong Kong today.
Conduit Road
Henderson said June 15 it will take a charge of HK$734 million ($94 million) against earnings after prospective buyers canceled purchases of 20 apartments at the 39 Conduit Road luxury development in the Mid-Levels district. Among those was an apartment with a price tag of HK$439 million, or a record HK$88,000 per square foot.
The shares have dropped 2.4 percent since then, while the property index rose 5.3 percent in the period.
The government said on June 18 that regulatory and law enforcement authorities would probe the Conduit Road transactions. Police seized documents from the developer’s offices July 14, while lawmakers in the city’s parliament met twice to discuss Henderson. The company declined an invitation to appear before a July 12 Legislative Council meeting.
Home prices in the city have risen 38 percent since January 2009, sparking government policies to stem the climb such as higher stamp duties and selling more land.
Henderson has insisted the transactions were “genuine.” Lee, whose fortune Forbes magazine estimated at $18.5 billion in March, last spoke publicly when Henderson announced that the sales fell through, and declined to comment to Bloomberg News.
Shell Companies
“The company strongly rejects” allegations that there have been irregularities in the sale of the apartments, it said in a statement published in the English-language South China Morning Post newspaper last week.
The sales were to shell companies, which Henderson has said is a “common practice” in the industry.
Given the incentives and the size of the transactions “there is nothing unusual in the fact that the buyers in Conduit Road were all companies,” said David Webb, a Hong Kong- based shareholder activist who defended the company in regard to Conduit Road in a July 12 report on his Webb-site.com.
The prices reported and recorded with the Land Registry represented agreements to buy, not completed purchases, he said.
Landbank
The government probe may lead to “more pressure for legislation to rein in the developers in Hong Kong where they are seen often to have way too much power,” Peter Churchouse, chairman of Hong Kong-based property investment firm Portwood Capital, told Bloomberg Television July 19.
Industries such as banking and property currently decide half of the city legislature’s 60 seats. The Election Committee that picks the city’s Chief Executive includes the heads of developers including Lee and the city’s richest man, Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd., the world’s second- biggest developer by market value.
CLSA Ltd., the regional brokerage unit of Paris-based Credit Agricole SA, has an “outperform” rating on Henderson because of the company’s low debt level and rental income, said Nicole Wong.
“There may have been some issues lately, but given the strength of the property market and its current price level, this is the appropriate rating,” said Wong, Hong Kong-based regional head of property research at CLSA. “Henderson’s balance sheet and landbank are still sound.”
Negotiating Tactics
Lee was born in the neighboring Chinese province of Guangdong and arrived in Hong Kong at 19. He helped co-found Sun Hung Kai Properties Ltd., now the world’s biggest developer by market value, in 1963. Ten years later, with HK$50 million and about 50 staff he started Henderson, according to Feng Bangyan, author of “A Century of Hong Kong Real Estate Development” and a professor at Jinan University in Guangzhou in Guangdong province.
Lee, who still holds shares and is a vice-chairman and independent director of Sun Hung Kai, listed Henderson on the Hong Kong exchange in 1981. The shares have risen more than 20- fold since 1986, according to data compiled by Bloomberg.
The developer’s landmark properties include the International Financial Center, co-developed with Sun Hung Kai, and luxury residential projects such as the Grand Promenade in Sai Wan Ho in the Eastern district of Hong Kong Island and the Grand Waterfront in East Kowloon.
While most rivals bought land through government auctions, Lee sent negotiators to persuade owners of dilapidated buildings in older residential areas in the New Territories that border the mainland to sell. Henderson also acquires agricultural land from the government and owners.
Old Buildings
“This strategy means they can often add land bank at a very cheap price without any competition,” said Feng. “It is Henderson’s killer move and not one that can be easily emulated. It takes a lot of experience to build up a team like this and the negotiations are often lengthy.”
Taking advantage of rising incomes among the city’s working class, Lee focused on building apartments of 300 square feet to 500 square feet as he expanded Henderson into a HK$100 billion company. About 50 percent of the city’s 7 million residents live in subsidized housing.
In 1975, the company led a group comprised of Sun Hung Kai and Cheung Kong that won the right to develop the first phase of a 10,600-apartment complex in the Shatin district, the first of projects Henderson would develop in the New Territories.
Henderson’s acquisitions of old buildings “have picked up significantly,” Morgan Stanley analysts led by Theo Cheng said in a June 18 report. “Its shares have been held back by bad press.” They have an “overweight” rating on the stock.
Bullish Beliefs
Lee is showing no signs of wavering from his bullish view on property prices, which he has said will be driven by demand from mainland China. Henderson plans to build 45,000 units across the city, Lee said June 1 without giving a timeframe.
Lee’s youngest son Martin, who is married to a former model and actress, bid HK$1.82 billion for a site at the Peak, Hong Kong’s most exclusive residential area, in May to build a family residence, setting a per-square-foot record for a Hong Kong public auction.
After the sales at 39 Conduit Road were canceled, the elder Lee said the flats may fetch an even higher price later.
“I doubt he’d change his style or the way he does business because of this” investigation, said Anita Leung, author of Lee’s 1997 biography and a sequel to be published later this year. “He has been a property developer his whole life and has been tested many times in the past.”
Lee, who still goes to work every day at his office in the International Finance Centre, Hong Kong’s second-tallest building, is known for his frugal lifestyle and his interest in the Taoist philosophy, which emphasizes compassion, moderation and humility.
Taoism
He is an honorary adviser of the Hong Kong Taoist Association and has made donations to other Taoist organizations and spoken at their forums. He’s donated millions of dollars to universities in Hong Kong and mainland China, and various charity organizations, including 10 million yuan ($1.5 million) to a Taoist forum in 2007 and 100 million yuan to victims of the Sichuan earthquake in 2008.
It’s unlikely there will be “any real serious” charges brought against the company, said Portwood’s Churchouse. “Perhaps the shares have been marked down a little aggressively. It has a great portfolio of properties, it does great business in Hong Kong and China.”
“Whatever the outcome, it’ll only be the tip of the iceberg compared to the sheer size of their business,” said Castor Pang, Hong Kong-based research director at Cinda International Holdings Ltd. “It won’t have much impact on the fundamentals.”
Henderson, founded by Lee Shau-kee in 1973, said in October it sold 24 luxury flats for as much as a record HK$88,000 a square foot. Eight months later, it said 20 of the sales fell through, sparking a government probe. The company has denied any wrongdoing.
The investigation may have tarnished the public image of the 82-year-old billionaire, though 17 of 25 analysts who cover Henderson rate the stock a “buy,” according to data compiled by Bloomberg. Lee has steered the company to buy land outside of government auctions, the main source of development plots in Hong Kong, to build a 40 million-square-foot (3.7 million- square-meter) landbank in the rural New Territories, the most among local developers.
“This controversy has no doubt dented their reputation and image,” Pang said.
The average 12-month price forecast of 20 analysts who provided targets is HK$58.24, 25 percent higher than the shares’ closing price yesterday. That’s the most bullish forecast among the seven developers in the Hang Seng Property Index.
Henderson shares rose 0.1 percent to HK$46.55 at 10:49 a.m. in Hong Kong today.
Conduit Road
Henderson said June 15 it will take a charge of HK$734 million ($94 million) against earnings after prospective buyers canceled purchases of 20 apartments at the 39 Conduit Road luxury development in the Mid-Levels district. Among those was an apartment with a price tag of HK$439 million, or a record HK$88,000 per square foot.
The shares have dropped 2.4 percent since then, while the property index rose 5.3 percent in the period.
The government said on June 18 that regulatory and law enforcement authorities would probe the Conduit Road transactions. Police seized documents from the developer’s offices July 14, while lawmakers in the city’s parliament met twice to discuss Henderson. The company declined an invitation to appear before a July 12 Legislative Council meeting.
Home prices in the city have risen 38 percent since January 2009, sparking government policies to stem the climb such as higher stamp duties and selling more land.
Henderson has insisted the transactions were “genuine.” Lee, whose fortune Forbes magazine estimated at $18.5 billion in March, last spoke publicly when Henderson announced that the sales fell through, and declined to comment to Bloomberg News.
Shell Companies
“The company strongly rejects” allegations that there have been irregularities in the sale of the apartments, it said in a statement published in the English-language South China Morning Post newspaper last week.
The sales were to shell companies, which Henderson has said is a “common practice” in the industry.
Given the incentives and the size of the transactions “there is nothing unusual in the fact that the buyers in Conduit Road were all companies,” said David Webb, a Hong Kong- based shareholder activist who defended the company in regard to Conduit Road in a July 12 report on his Webb-site.com.
The prices reported and recorded with the Land Registry represented agreements to buy, not completed purchases, he said.
Landbank
The government probe may lead to “more pressure for legislation to rein in the developers in Hong Kong where they are seen often to have way too much power,” Peter Churchouse, chairman of Hong Kong-based property investment firm Portwood Capital, told Bloomberg Television July 19.
Industries such as banking and property currently decide half of the city legislature’s 60 seats. The Election Committee that picks the city’s Chief Executive includes the heads of developers including Lee and the city’s richest man, Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd., the world’s second- biggest developer by market value.
CLSA Ltd., the regional brokerage unit of Paris-based Credit Agricole SA, has an “outperform” rating on Henderson because of the company’s low debt level and rental income, said Nicole Wong.
“There may have been some issues lately, but given the strength of the property market and its current price level, this is the appropriate rating,” said Wong, Hong Kong-based regional head of property research at CLSA. “Henderson’s balance sheet and landbank are still sound.”
Negotiating Tactics
Lee was born in the neighboring Chinese province of Guangdong and arrived in Hong Kong at 19. He helped co-found Sun Hung Kai Properties Ltd., now the world’s biggest developer by market value, in 1963. Ten years later, with HK$50 million and about 50 staff he started Henderson, according to Feng Bangyan, author of “A Century of Hong Kong Real Estate Development” and a professor at Jinan University in Guangzhou in Guangdong province.
Lee, who still holds shares and is a vice-chairman and independent director of Sun Hung Kai, listed Henderson on the Hong Kong exchange in 1981. The shares have risen more than 20- fold since 1986, according to data compiled by Bloomberg.
The developer’s landmark properties include the International Financial Center, co-developed with Sun Hung Kai, and luxury residential projects such as the Grand Promenade in Sai Wan Ho in the Eastern district of Hong Kong Island and the Grand Waterfront in East Kowloon.
While most rivals bought land through government auctions, Lee sent negotiators to persuade owners of dilapidated buildings in older residential areas in the New Territories that border the mainland to sell. Henderson also acquires agricultural land from the government and owners.
Old Buildings
“This strategy means they can often add land bank at a very cheap price without any competition,” said Feng. “It is Henderson’s killer move and not one that can be easily emulated. It takes a lot of experience to build up a team like this and the negotiations are often lengthy.”
Taking advantage of rising incomes among the city’s working class, Lee focused on building apartments of 300 square feet to 500 square feet as he expanded Henderson into a HK$100 billion company. About 50 percent of the city’s 7 million residents live in subsidized housing.
In 1975, the company led a group comprised of Sun Hung Kai and Cheung Kong that won the right to develop the first phase of a 10,600-apartment complex in the Shatin district, the first of projects Henderson would develop in the New Territories.
Henderson’s acquisitions of old buildings “have picked up significantly,” Morgan Stanley analysts led by Theo Cheng said in a June 18 report. “Its shares have been held back by bad press.” They have an “overweight” rating on the stock.
Bullish Beliefs
Lee is showing no signs of wavering from his bullish view on property prices, which he has said will be driven by demand from mainland China. Henderson plans to build 45,000 units across the city, Lee said June 1 without giving a timeframe.
Lee’s youngest son Martin, who is married to a former model and actress, bid HK$1.82 billion for a site at the Peak, Hong Kong’s most exclusive residential area, in May to build a family residence, setting a per-square-foot record for a Hong Kong public auction.
After the sales at 39 Conduit Road were canceled, the elder Lee said the flats may fetch an even higher price later.
“I doubt he’d change his style or the way he does business because of this” investigation, said Anita Leung, author of Lee’s 1997 biography and a sequel to be published later this year. “He has been a property developer his whole life and has been tested many times in the past.”
Lee, who still goes to work every day at his office in the International Finance Centre, Hong Kong’s second-tallest building, is known for his frugal lifestyle and his interest in the Taoist philosophy, which emphasizes compassion, moderation and humility.
Taoism
He is an honorary adviser of the Hong Kong Taoist Association and has made donations to other Taoist organizations and spoken at their forums. He’s donated millions of dollars to universities in Hong Kong and mainland China, and various charity organizations, including 10 million yuan ($1.5 million) to a Taoist forum in 2007 and 100 million yuan to victims of the Sichuan earthquake in 2008.
It’s unlikely there will be “any real serious” charges brought against the company, said Portwood’s Churchouse. “Perhaps the shares have been marked down a little aggressively. It has a great portfolio of properties, it does great business in Hong Kong and China.”
Indian group in talks with BP on Vietnam assets
India’s largest oil group is in talks with BP to buy its Vietnamese assets as the UK company works towards the $10bn of sales it has targeted in the wake of the Gulf of Mexico oil spill.
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Wednesday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team . . . the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest.
R.S. Sharma, chairman of the state-owned Oil and Natural Gas Corp, told the Financial Times that he would be in Hanoi on Wednesday with Murli Deora, India’s oil minister, to discuss the deal with the Vietnamese authorities and PetroVietnam, the state oil company. He said the matter would also discussed with David Cameron, the UK prime minister, on his official visit to New Delhi next week.
“BP has given its intention that they want to sell their stake in the Vietnam oilfield and we are discussing with them a way to reach a deal,” said Mr Sharma. “We will be talking with Cameron and his team . . . the [Indian] government is fully backing this deal.”
BP intends to sell all of its assets in Vietnam and Pakistan, except for its lubricants business, in its drive to raise $10bn to help pay for the Gulf oil spill clean up and compensation.
The Vietnamese assets are valued at about $966m and the Pakistan business at about $690m, according to UBS. ONGC said it was only interested in Vietnam, where it already has interests.
BP has been operating in Vietnam for more than two decades and its flagship asset is the Nam Con Son gas project in the South China Sea, in which it has a 35 per cent interest in two fields, with ONGC holding a 45 per cent stake and PetroVietnam owning a 20 per cent stake.
BP has a minority stake in the 371km Nam Con Son pipeline connecting the field to onshore terminals, and controls a third of the Phu My power plant.
“We would welcome interest from any parties and we’ll work towards a deal hopefully by the end of the year,” said BP, which declined to comment on ONGC’s interest.
Tuesday, July 20, 2010
Mitsubishi UFJ May Buy Additional U.S. Banking Assets
July 21 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc., the Japanese lender that bought UnionBanCal Corp., said it may spend more than 500 billion yen ($5.7 billion) to acquire more U.S. banks as domestic loan demand falls.
Japan’s largest bank by market value is examining about 7 lenders of similar size to UnionBanCal, said Tatsuo Tanaka, head of global banking. The Tokyo-based bank aims to boost overseas profit by more than 40 percent to 1 trillion yen, he said.
The bank, which invested $9 billion in Morgan Stanley in 2008, is looking abroad as the world’s second-largest economy slows and the nation’s population declines. Mitsubishi UFJ spent about $3.6 billion the same year to take full control of San Francisco-based UnionBanCal.
“We want to be one of the top ten banks in the U.S. in terms of assets and profit,” Tanaka, 63, said in an interview in Tokyo yesterday. “I’d like to do a large investment in the U.S.” He didn’t provide a timeline for the revenue target or acquisitions.
Tanaka will become chairman of UnionBanCal on July 28. The lender reported net income of $77 million in the three months ended March 31, after a loss of $65 million in the previous year as bad-loan provisions doubled. The unit acquired Washington- based Frontier Bank and California’s Tamalpais Bank in agreements with the Federal Deposit Insurance Corp. in April.
Japan’s economy will expand 2.5 percent this year, compared with 8.7 percent for developing nations in east Asia, the World Bank forecast last month. Lending by Japan’s banks fell by 2.1 percent in June from a year earlier, the seventh straight month of declines.
Coast to Coast
Mitsubishi MUFJ fell 0.3 percent to 400 yen as of 9:08 a.m. in Tokyo Stock Exchange trading. The stock has dropped 11 percent this year.
Mitsubishi UFJ will “actively consider quality investment opportunities” in the U.S. market, the bank said in presentation material dated May 21. Tanaka said yesterday these may be on the east and west coasts, without naming any targets.
Rival Sumitomo Mitsui Financial Group Inc., Japan’s third- largest publicly traded bank by assets, may spend as much as $5 billion to buy a stake in a U.S. bank in the next three years, Hiroshi Minoura, head of international banking at Sumitomo Mitsui Banking Corp., said earlier this month.
Mitsubishi UFJ received 78.2 billion yen in dividend income from its investment in Morgan Stanley in the fiscal year ended March 31, according to regulatory filings. It still owns $8.4 billion of Morgan Stanley preference shares, which pay an annual dividend of 10 percent, according to the bank’s financial disclosures.
Mitsubishi UFJ returned to profit in the fiscal year ended March 31 and said it expects profit to rise 2.9 percent to 400 billion yen this year. That would still be less than half what the bank earned in the 12 months through March 2007.
The bank raised 1.03 trillion yen in a share sale in December, raising the bank’s Tier 1 Capital Ratio, an indicator of a lender’s ability to absorb losses, to 10.6 percent.
Japan’s largest bank by market value is examining about 7 lenders of similar size to UnionBanCal, said Tatsuo Tanaka, head of global banking. The Tokyo-based bank aims to boost overseas profit by more than 40 percent to 1 trillion yen, he said.
The bank, which invested $9 billion in Morgan Stanley in 2008, is looking abroad as the world’s second-largest economy slows and the nation’s population declines. Mitsubishi UFJ spent about $3.6 billion the same year to take full control of San Francisco-based UnionBanCal.
“We want to be one of the top ten banks in the U.S. in terms of assets and profit,” Tanaka, 63, said in an interview in Tokyo yesterday. “I’d like to do a large investment in the U.S.” He didn’t provide a timeline for the revenue target or acquisitions.
Tanaka will become chairman of UnionBanCal on July 28. The lender reported net income of $77 million in the three months ended March 31, after a loss of $65 million in the previous year as bad-loan provisions doubled. The unit acquired Washington- based Frontier Bank and California’s Tamalpais Bank in agreements with the Federal Deposit Insurance Corp. in April.
Japan’s economy will expand 2.5 percent this year, compared with 8.7 percent for developing nations in east Asia, the World Bank forecast last month. Lending by Japan’s banks fell by 2.1 percent in June from a year earlier, the seventh straight month of declines.
Coast to Coast
Mitsubishi MUFJ fell 0.3 percent to 400 yen as of 9:08 a.m. in Tokyo Stock Exchange trading. The stock has dropped 11 percent this year.
Mitsubishi UFJ will “actively consider quality investment opportunities” in the U.S. market, the bank said in presentation material dated May 21. Tanaka said yesterday these may be on the east and west coasts, without naming any targets.
Rival Sumitomo Mitsui Financial Group Inc., Japan’s third- largest publicly traded bank by assets, may spend as much as $5 billion to buy a stake in a U.S. bank in the next three years, Hiroshi Minoura, head of international banking at Sumitomo Mitsui Banking Corp., said earlier this month.
Mitsubishi UFJ received 78.2 billion yen in dividend income from its investment in Morgan Stanley in the fiscal year ended March 31, according to regulatory filings. It still owns $8.4 billion of Morgan Stanley preference shares, which pay an annual dividend of 10 percent, according to the bank’s financial disclosures.
Mitsubishi UFJ returned to profit in the fiscal year ended March 31 and said it expects profit to rise 2.9 percent to 400 billion yen this year. That would still be less than half what the bank earned in the 12 months through March 2007.
The bank raised 1.03 trillion yen in a share sale in December, raising the bank’s Tier 1 Capital Ratio, an indicator of a lender’s ability to absorb losses, to 10.6 percent.
Asian Stocks Gain on Apple Profit; Dollar Drops Before Bernanke
July 21 (Bloomberg) -- Asian stocks rose as technology companies were boosted by Apple Inc.’s better-than-estimated earnings, while the dollar weakened ahead of testimony to Congress by Federal Reserve Chairman Ben S. Bernanke.
The MSCI Asia Pacific Index gained 0.3 percent to 115.76 as of 10:57 a.m. in Tokyo, with about two stocks advancing for each one that declined. Futures on the Standard & Poor’s 500 Index lost 0.2 percent after the gauge climbed 1.1 percent yesterday. The dollar traded near a two-month low versus the euro and was at 87.24 yen in Tokyo from 87.51 yen in New York yesterday.
Equities were boosted after Apple posted a 78 percent surge in third-quarter profit as customers flocked to the new iPad tablet computer. Bernanke gives his semi-annual report on the economy to Congress today and tomorrow amid diminishing expectations that interest rates will rise soon.
“The global economy is slowing down, but concern about a double-dip recession is fading,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.
Nine of 10 industries in the S&P 500 advanced yesterday as commodity producers and homebuilders, which defied the earlier slump, led gains after a U.S. government report showed building permits, a gauge of future construction, rose 2.1 percent last month. Taiwan’s Taiex index rose 0.3 percent and South Korea’s Kospi index climbed 0.7 percent, both gaining for a second day. The Nikkei 225 Stock Average rose 0.2 percent.
Apple Boost
Samsung Electronics Co., which supplies semiconductor chips for Apple products, increased 1.6 percent. LG Chem Ltd., the iPhone battery supplier that reported record quarterly profit yesterday, gained 3.6 percent. Catcher Technology Co., which supplies metal parts for the iPhone, climbed 1.8 percent.
The dollar traded at $1.2899 per euro from $1.2880 yesterday, when it touched $1.3029, the lowest since May 10. The euro was at 112.53 yen from 112.70 yen.
“Disappointing economic data and diminishing expectations the Federal Reserve will raise rates have pushed down the dollar,” said Satoru Ogasawara, a foreign-exchange analyst and economist in Tokyo at Credit Suisse AG. “The dollar may fall to 85 yen in the short term.”
Australia Gains
Australia’s currency traded at 88.22 U.S. cents from 88.39 cents yesterday, when it gained 1.8 percent. It reached 88.71 cents on July 14, the most since May 14. The currency was at 76.979 yen from 77.35 yen.
“Commodity currencies will continue to follow equity markets,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. “Bernanke’s testimony is the other thing driving the U.S. dollar weakness with people expecting him to be dovish.”
The cost of protecting Asia-Pacific bonds from non-payment declined, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped for a third day, falling 4 basis points to 127 basis points in Hong Kong, the lowest level since July 15, according to Credit Agricole CIB and CMA prices. The Markit iTraxx Japan index fell 4 basis points to 126 basis points in Tokyo, also the lowest since July 15, Morgan Stanley and CMA prices show.
The MSCI Asia Pacific Index gained 0.3 percent to 115.76 as of 10:57 a.m. in Tokyo, with about two stocks advancing for each one that declined. Futures on the Standard & Poor’s 500 Index lost 0.2 percent after the gauge climbed 1.1 percent yesterday. The dollar traded near a two-month low versus the euro and was at 87.24 yen in Tokyo from 87.51 yen in New York yesterday.
Equities were boosted after Apple posted a 78 percent surge in third-quarter profit as customers flocked to the new iPad tablet computer. Bernanke gives his semi-annual report on the economy to Congress today and tomorrow amid diminishing expectations that interest rates will rise soon.
“The global economy is slowing down, but concern about a double-dip recession is fading,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.
Nine of 10 industries in the S&P 500 advanced yesterday as commodity producers and homebuilders, which defied the earlier slump, led gains after a U.S. government report showed building permits, a gauge of future construction, rose 2.1 percent last month. Taiwan’s Taiex index rose 0.3 percent and South Korea’s Kospi index climbed 0.7 percent, both gaining for a second day. The Nikkei 225 Stock Average rose 0.2 percent.
Apple Boost
Samsung Electronics Co., which supplies semiconductor chips for Apple products, increased 1.6 percent. LG Chem Ltd., the iPhone battery supplier that reported record quarterly profit yesterday, gained 3.6 percent. Catcher Technology Co., which supplies metal parts for the iPhone, climbed 1.8 percent.
The dollar traded at $1.2899 per euro from $1.2880 yesterday, when it touched $1.3029, the lowest since May 10. The euro was at 112.53 yen from 112.70 yen.
“Disappointing economic data and diminishing expectations the Federal Reserve will raise rates have pushed down the dollar,” said Satoru Ogasawara, a foreign-exchange analyst and economist in Tokyo at Credit Suisse AG. “The dollar may fall to 85 yen in the short term.”
Australia Gains
Australia’s currency traded at 88.22 U.S. cents from 88.39 cents yesterday, when it gained 1.8 percent. It reached 88.71 cents on July 14, the most since May 14. The currency was at 76.979 yen from 77.35 yen.
“Commodity currencies will continue to follow equity markets,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. “Bernanke’s testimony is the other thing driving the U.S. dollar weakness with people expecting him to be dovish.”
The cost of protecting Asia-Pacific bonds from non-payment declined, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped for a third day, falling 4 basis points to 127 basis points in Hong Kong, the lowest level since July 15, according to Credit Agricole CIB and CMA prices. The Markit iTraxx Japan index fell 4 basis points to 126 basis points in Tokyo, also the lowest since July 15, Morgan Stanley and CMA prices show.
Facing Pension Woes, Maine Looks to Social Security
Lawmakers in Maine have found an unusual tool for tackling their state’s pension woes: Social Security.
Just as workers in the private sector participate in Social Security in addition to any pension plan at their companies, most states put their workers in the federal program along with providing a state pension.
Maine and a handful of others, however, have long been holdouts, relying solely on their state pension plans. In addition, most states have excluded some workers — often teachers, firefighters and police — from the national retirement system and its associated costs, 6.2 percent of payroll for the employer and an equal amount for the worker.
Now, Maine legislators have prepared a detailed plan for shifting state employees into Social Security and are considering whether to adopt it. They acknowledge it will not solve their problem in the short term but see long-term advantages.
Some variation on this idea could ultimately appeal to other states grappling with their own exploding pension costs and, in extreme cases, quietly looking for help from Washington. In troubled states, some employees have wondered whether they might be allowed to begin paying in and collecting from the federal system even before they have contributed a career’s worth of taxes.
The potential effect on the Social Security program is hard to estimate. Maine’s proposal would mean new members and a small additional source of payroll tax revenue for the federal system.
Even if it fully embraces the proposal, Maine will have to come up with a considerable sum to sustain its existing pension plan, presumably through some combination of taxes and service cuts. After a phase-in period, Social Security would cover part of state retirees’ benefits, with the state pension as the remainder. Many pension plans in corporate America coordinate their benefits in this way.
The proposal has the advantage of not reducing promised benefits, guaranteed by the constitution in many states. The change would not be cheap, but it would reduce the role of Maine’s pension fund and thus the risk of having to suddenly cover giant losses down the road.
A Social Security spokesman said the agency did not expect many of the holdout states to join, citing the cost of participation. The only other state known to have talked recently about adding Social Security is Louisiana.
More than six million public employees work outside the Social Security system, including roughly 1.7 million teachers in California, Illinois and Texas, and nearly two million employees of all types in Alaska, Colorado, Massachusetts, Nevada and Ohio, as well as Louisiana and Maine. For years, these and other states have insisted they could provide richer pensions at a lower cost, both to workers and taxpayers, because of investments.
Some of those states’ pension plans now have shortfalls so large that they need outsize contributions. Virtually all state pension funds have had big losses in the last two years, but the go-it-alone states appear especially vulnerable.
Not only are these states trying to provide richer benefits with smaller contributions than the payroll tax for Social Security, but they have promised to do it for workers who can retire 10 and sometimes 20 years younger.
With pension costs ballooning and taxpayers lashing out, many workers in states with deeply underfunded plans fear their benefits will be cut. Those being asked to put more into their pension funds complain they feel caught up in Ponzi schemes. Some wish they had been part of Social Security after all.
“Had I known back then, I would not have stayed in Illinois,” said John Gebhardt, a university employee in that state, which keeps teachers and university personnel out of Social Security. He has even offered to pay both his own and his employer’s payroll tax to join Social Security, but was told no.
Maine lawmakers who support shifting state workers into Social Security say they believe it would be fairer. Social Security may not be sexy, but it is portable.
A recent study in Maine underscored the penalty paid by the mobile work force. Only one in five state employees stays around long enough to get a full pension. The majority leave, taking neither a pension nor any Social Security credits with them. This practice, not investment gains, has sustained the state’s pension system.
Just as workers in the private sector participate in Social Security in addition to any pension plan at their companies, most states put their workers in the federal program along with providing a state pension.
Maine and a handful of others, however, have long been holdouts, relying solely on their state pension plans. In addition, most states have excluded some workers — often teachers, firefighters and police — from the national retirement system and its associated costs, 6.2 percent of payroll for the employer and an equal amount for the worker.
Now, Maine legislators have prepared a detailed plan for shifting state employees into Social Security and are considering whether to adopt it. They acknowledge it will not solve their problem in the short term but see long-term advantages.
Some variation on this idea could ultimately appeal to other states grappling with their own exploding pension costs and, in extreme cases, quietly looking for help from Washington. In troubled states, some employees have wondered whether they might be allowed to begin paying in and collecting from the federal system even before they have contributed a career’s worth of taxes.
The potential effect on the Social Security program is hard to estimate. Maine’s proposal would mean new members and a small additional source of payroll tax revenue for the federal system.
Even if it fully embraces the proposal, Maine will have to come up with a considerable sum to sustain its existing pension plan, presumably through some combination of taxes and service cuts. After a phase-in period, Social Security would cover part of state retirees’ benefits, with the state pension as the remainder. Many pension plans in corporate America coordinate their benefits in this way.
The proposal has the advantage of not reducing promised benefits, guaranteed by the constitution in many states. The change would not be cheap, but it would reduce the role of Maine’s pension fund and thus the risk of having to suddenly cover giant losses down the road.
A Social Security spokesman said the agency did not expect many of the holdout states to join, citing the cost of participation. The only other state known to have talked recently about adding Social Security is Louisiana.
More than six million public employees work outside the Social Security system, including roughly 1.7 million teachers in California, Illinois and Texas, and nearly two million employees of all types in Alaska, Colorado, Massachusetts, Nevada and Ohio, as well as Louisiana and Maine. For years, these and other states have insisted they could provide richer pensions at a lower cost, both to workers and taxpayers, because of investments.
Some of those states’ pension plans now have shortfalls so large that they need outsize contributions. Virtually all state pension funds have had big losses in the last two years, but the go-it-alone states appear especially vulnerable.
Not only are these states trying to provide richer benefits with smaller contributions than the payroll tax for Social Security, but they have promised to do it for workers who can retire 10 and sometimes 20 years younger.
With pension costs ballooning and taxpayers lashing out, many workers in states with deeply underfunded plans fear their benefits will be cut. Those being asked to put more into their pension funds complain they feel caught up in Ponzi schemes. Some wish they had been part of Social Security after all.
“Had I known back then, I would not have stayed in Illinois,” said John Gebhardt, a university employee in that state, which keeps teachers and university personnel out of Social Security. He has even offered to pay both his own and his employer’s payroll tax to join Social Security, but was told no.
Maine lawmakers who support shifting state workers into Social Security say they believe it would be fairer. Social Security may not be sexy, but it is portable.
A recent study in Maine underscored the penalty paid by the mobile work force. Only one in five state employees stays around long enough to get a full pension. The majority leave, taking neither a pension nor any Social Security credits with them. This practice, not investment gains, has sustained the state’s pension system.
SKS Microfinance plans to raise $350m in IPO
SKS Microfinance, India’s largest lender to the poor, aims to raise about $350m this month by selling a 21.6 per cent stake in an initial public offering expected to spark a wave of listings by equity-strapped Indian microfinance companies.
SKS will be one of the biggest microfinance companies to go public since the controversial 2008 share offering of Mexico’s Compartamos tore the close-knit world of global microfinance institutions apart with a soul-searching debate about the ethics of profiting from the poor.
Microfinance was born in the 1970s as an idealistic effort to provide small loans to the rural poor to save them from the clutches of traditional moneylenders.
Muhammad Yunus, the Nobel Peace Prize-winning founder of Bangladesh’s Grameen Bank – the world’s most famous microlender – has criticised the commercialisation of the industry, saying profit-oriented microlenders are little different to the loan sharks they once set out to replace.
However, Vikram Akula, the former McKinsey consultant who founded SKS, says Indian microfinance companies must go public if they are to meet the huge unmet demand for more affordable credit from the poor, a market he estimates to be worth about $50bn.
“The view of Professor Yunus is that microfinance should be a social business – no profit, no loss,” he said.
“We feel the only way to get $50bn is to go to the commercial capital markets and the only way to convince them to back you is not to be profitable, but very profitable.”
Mr Akula said SKS, which says it has 7m borrowers in 19 Indian States, also plans to boost its revenues through alliances with large companies to distribute their products – such as mobile phones and water purifiers – even as it provides rural consumers with the microloans needed to buy the items.
The microlender has already been running pilot projects with Nokia, the world’s largest handset maker, Unilever, the Anglo-Dutch consumer goods company, and Bajaj Allianz, the insurer, to distribute their goods and services, although Mr Akula said such lending represented a tiny fraction of its outstanding $960m loan portfolio.
“We have built a large distribution network in rural India,” said the SKS founder.
“We believe we can leverage this network to distribute financial products of other institutions to our members at a cost lower than other institutions”.
SKS will be one of the biggest microfinance companies to go public since the controversial 2008 share offering of Mexico’s Compartamos tore the close-knit world of global microfinance institutions apart with a soul-searching debate about the ethics of profiting from the poor.
Microfinance was born in the 1970s as an idealistic effort to provide small loans to the rural poor to save them from the clutches of traditional moneylenders.
Muhammad Yunus, the Nobel Peace Prize-winning founder of Bangladesh’s Grameen Bank – the world’s most famous microlender – has criticised the commercialisation of the industry, saying profit-oriented microlenders are little different to the loan sharks they once set out to replace.
However, Vikram Akula, the former McKinsey consultant who founded SKS, says Indian microfinance companies must go public if they are to meet the huge unmet demand for more affordable credit from the poor, a market he estimates to be worth about $50bn.
“The view of Professor Yunus is that microfinance should be a social business – no profit, no loss,” he said.
“We feel the only way to get $50bn is to go to the commercial capital markets and the only way to convince them to back you is not to be profitable, but very profitable.”
Mr Akula said SKS, which says it has 7m borrowers in 19 Indian States, also plans to boost its revenues through alliances with large companies to distribute their products – such as mobile phones and water purifiers – even as it provides rural consumers with the microloans needed to buy the items.
The microlender has already been running pilot projects with Nokia, the world’s largest handset maker, Unilever, the Anglo-Dutch consumer goods company, and Bajaj Allianz, the insurer, to distribute their goods and services, although Mr Akula said such lending represented a tiny fraction of its outstanding $960m loan portfolio.
“We have built a large distribution network in rural India,” said the SKS founder.
“We believe we can leverage this network to distribute financial products of other institutions to our members at a cost lower than other institutions”.
Sunday, July 18, 2010
Mercedes-Benz steers at India
Mercedes-Benz has launched an aggressive strategy to target the luxury sports car market in India, as it expects strong demand growth for high-end vehicles over the next 10 years.
Leading European luxury carmakers are looking to expand into one of the fastest growing emerging markets for high-end cars and Mercedes-Benz has picked India over China to launch its latest super sports car.
EDITOR’S CHOICE
Mercedes eyes closer ties with BMW - Sep-09
Germans still have breathing space on CO2 - Sep-08
Mercedes versus BMW - Sep-05
BMW considers low-emission supermini - Jul-31
Profits soar at Mercedes - Jul-26
McLaren gets Santander as sponsor - Jun-29
“Enjoying luxury and investing in a Mercedes-Benz today in India is much more socially acceptable than five to 10 years ago,” said Wilfried Aulbur, chief executive of Mercedes-Benz India at the launch of the right-hand drive SLS AMG in New Delhi.
“For Mercedes-Benz, the sky is the limit in India. This car is a brand shaper. I do believe the Indian market will be one of the key markets for luxury cars worldwide and we expect strong double-digit growth over the next few years.”
China, which boasts more than 900,000 dollar millionaires, has already become a big player in the luxury car market and this demand is spreading to India.
According to Capgemini and Merrill Lynch Wealth Management research, India’s 120,000 dollar millionaires hold roughly a third of the country’s gross national income and this number is increasing rapidly.
“India’s luxury car market will grow in leaps and bounds over the next few years driven by two major trends,” said Mr Aulbur. “First, disposable incomes are likely to grow by at least a factor of five over the next five to 10 years and, second, there is a significant mindset change observable with Indian consumers.”
Mercedes-Benz India, which saw a record 79 per cent growth in year-on-year sales for the first half of this year, chose India for its second launch of the supercar after Germany, a strong statement from the company about how it regards the future potential of the Indian luxury car market.
Since its presentation in January, there have been 10 confirmed sales in India of the SLS AMG worth a minimum of Rs2m ($405,721) each and although Mr Aulbur declined to comment on sales projections, people close to the company said achieving a further 10 by the end of the year was a realistic target.
The company, which started trading in India in 1994, was a pioneer in the luxury car market, launching the E-Class in 1995. Mercedes-Benz has 30,000 cars on India’s roads and holds second place to BMW as the largest seller of luxury cars with Audi in third place.
While the luxury car market constitutes less than 1 per cent of the overall car market in India, it is growing fast. Companies such as Mercedes, BMW, Porsche, Rolls-Royce and Bentley have all set up manufacturing plants in India.
Meanwhile, Ferrari is looking to open its first dealership in Mumbai in the next six to eight months, entering the market at a time when supercar manufacturers such as Bugatti and Aston Martin are trying their luck.
Leading European luxury carmakers are looking to expand into one of the fastest growing emerging markets for high-end cars and Mercedes-Benz has picked India over China to launch its latest super sports car.
EDITOR’S CHOICE
Mercedes eyes closer ties with BMW - Sep-09
Germans still have breathing space on CO2 - Sep-08
Mercedes versus BMW - Sep-05
BMW considers low-emission supermini - Jul-31
Profits soar at Mercedes - Jul-26
McLaren gets Santander as sponsor - Jun-29
“Enjoying luxury and investing in a Mercedes-Benz today in India is much more socially acceptable than five to 10 years ago,” said Wilfried Aulbur, chief executive of Mercedes-Benz India at the launch of the right-hand drive SLS AMG in New Delhi.
“For Mercedes-Benz, the sky is the limit in India. This car is a brand shaper. I do believe the Indian market will be one of the key markets for luxury cars worldwide and we expect strong double-digit growth over the next few years.”
China, which boasts more than 900,000 dollar millionaires, has already become a big player in the luxury car market and this demand is spreading to India.
According to Capgemini and Merrill Lynch Wealth Management research, India’s 120,000 dollar millionaires hold roughly a third of the country’s gross national income and this number is increasing rapidly.
“India’s luxury car market will grow in leaps and bounds over the next few years driven by two major trends,” said Mr Aulbur. “First, disposable incomes are likely to grow by at least a factor of five over the next five to 10 years and, second, there is a significant mindset change observable with Indian consumers.”
Mercedes-Benz India, which saw a record 79 per cent growth in year-on-year sales for the first half of this year, chose India for its second launch of the supercar after Germany, a strong statement from the company about how it regards the future potential of the Indian luxury car market.
Since its presentation in January, there have been 10 confirmed sales in India of the SLS AMG worth a minimum of Rs2m ($405,721) each and although Mr Aulbur declined to comment on sales projections, people close to the company said achieving a further 10 by the end of the year was a realistic target.
The company, which started trading in India in 1994, was a pioneer in the luxury car market, launching the E-Class in 1995. Mercedes-Benz has 30,000 cars on India’s roads and holds second place to BMW as the largest seller of luxury cars with Audi in third place.
While the luxury car market constitutes less than 1 per cent of the overall car market in India, it is growing fast. Companies such as Mercedes, BMW, Porsche, Rolls-Royce and Bentley have all set up manufacturing plants in India.
Meanwhile, Ferrari is looking to open its first dealership in Mumbai in the next six to eight months, entering the market at a time when supercar manufacturers such as Bugatti and Aston Martin are trying their luck.
Asia Stocks, Currencies Drop, Bond Risk Gains on Recovery Risk
July 19 (Bloomberg) -- Asian stocks fell the most in more than two weeks, regional currencies declined and bond risk increased on concern the global economic recovery is faltering.
The MSCI Asia Pacific excluding Japan Index lost as much as 1.3 percent to 390.04 and traded at 391.81 at 10:53 a.m. in Singapore, heading for its biggest decline since July 1. South Korea’s won fell the most this month, leading a drop in higher- yielding currencies, and bond risk climbed the most in six weeks. Standard & Poor’s 500 Index futures gained 0.2 percent after the gauge slumped 2.9 percent Friday.
U.S. consumer confidence sank to the lowest level in a year and Bank of America Corp., Citigroup Inc. and General Electric Co. reported worse-than-estimated revenue on July 16. Chinese premier Wen Jiabao said on a trip to Shaanxi province that the global recovery was slow and New Zealand reported the jobless rate was likely to stay “elevated” over coming quarters.
The results “point to a U.S. economy in a recovery mode that is at best is patchy,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The recovery may require fiscal stimulus to get to a point of being self-sustaining.”
Almost two shares fell for every one that gained on the MSCI Asia Pacific excluding Japan Index. The gauge has tumbled 6 percent this year on concern European efforts to curb deficits and Chinese moves to cool property prices will hurt growth. The Japanese market is closed today.
Australia’s S&P/ASX 200 Index sank 1.2 percent to 4,367.90 and New Zealand’s NZX 50 Index fell 0.6 percent, while South Korea’s Kospi declined 0.1 percent.
James Hardie, Samsung
James Hardie Industries SE, the biggest seller of home siding in the U.S., slumped 1.5 percent in Sydney on concern demand for its products will fall. Samsung Electronics Co., which gets a fifth of its sales in America, sank 0.9 percent in Seoul. BHP Billiton Ltd., the world’s largest mining company, lost 1 percent in Sydney.
China Petroleum & Chemical Corp., Asia’s biggest oil refiner, also known as Sinopec, and PetroChina Co., the country’s largest oil company, dropped as much as 1.8 percent.
An oil spill caused by an explosion in the northeastern Chinese port city of Dalian has “seriously” polluted 11 square kilometers of sea and “slightly” affected 50 square kilometers of water, the Xinhua News Agency reported.
South Korea’s won dropped on concern a faltering recovery in the U.S., the biggest economy, will hurt exports and curb demand for emerging-market assets. The won fell 0.9 percent to 1,214.35 per dollar. Malaysia’s ringgit fell 0.5 percent.
Asian Currencies
“It’s going to be a negative day for Asian currencies,” said Dariusz Kowalczyk, Hong Kong-based senior economist at Credit Agricole CIB. “We’ve seen a pretty substantial increase in global risk aversion, particularly from the U.S., which led investors to pare long positions in risk assets.”
The yen was little changed against the euro at 111.88 from 111.96 in New York last week, after earlier rising to 111.53, the strongest since July 13.
Australia’s dollar fell to a one-week low after Prime Minister Julia Gillard called an election, prompting speculation the central bank will refrain from raising interest rates during the campaign. Australia’s currency fell as much as 0.6 percent to 86.33 U.S. cents.
The cost of protecting Asian bonds from default surged. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan climbed 9 basis points to 137 basis points as of 8:23 a.m. in Singapore, the biggest jump since June 4, prices from Credit Agricole CIB and CMA show.
Oil for August delivery dropped as much as 51 cents, or 0.7 percent, to $75.50 a barrel on the New York Mercantile Exchange and traded at $75.82 at 11:13 a.m. Singapore time.
The MSCI Asia Pacific excluding Japan Index lost as much as 1.3 percent to 390.04 and traded at 391.81 at 10:53 a.m. in Singapore, heading for its biggest decline since July 1. South Korea’s won fell the most this month, leading a drop in higher- yielding currencies, and bond risk climbed the most in six weeks. Standard & Poor’s 500 Index futures gained 0.2 percent after the gauge slumped 2.9 percent Friday.
U.S. consumer confidence sank to the lowest level in a year and Bank of America Corp., Citigroup Inc. and General Electric Co. reported worse-than-estimated revenue on July 16. Chinese premier Wen Jiabao said on a trip to Shaanxi province that the global recovery was slow and New Zealand reported the jobless rate was likely to stay “elevated” over coming quarters.
The results “point to a U.S. economy in a recovery mode that is at best is patchy,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The recovery may require fiscal stimulus to get to a point of being self-sustaining.”
Almost two shares fell for every one that gained on the MSCI Asia Pacific excluding Japan Index. The gauge has tumbled 6 percent this year on concern European efforts to curb deficits and Chinese moves to cool property prices will hurt growth. The Japanese market is closed today.
Australia’s S&P/ASX 200 Index sank 1.2 percent to 4,367.90 and New Zealand’s NZX 50 Index fell 0.6 percent, while South Korea’s Kospi declined 0.1 percent.
James Hardie, Samsung
James Hardie Industries SE, the biggest seller of home siding in the U.S., slumped 1.5 percent in Sydney on concern demand for its products will fall. Samsung Electronics Co., which gets a fifth of its sales in America, sank 0.9 percent in Seoul. BHP Billiton Ltd., the world’s largest mining company, lost 1 percent in Sydney.
China Petroleum & Chemical Corp., Asia’s biggest oil refiner, also known as Sinopec, and PetroChina Co., the country’s largest oil company, dropped as much as 1.8 percent.
An oil spill caused by an explosion in the northeastern Chinese port city of Dalian has “seriously” polluted 11 square kilometers of sea and “slightly” affected 50 square kilometers of water, the Xinhua News Agency reported.
South Korea’s won dropped on concern a faltering recovery in the U.S., the biggest economy, will hurt exports and curb demand for emerging-market assets. The won fell 0.9 percent to 1,214.35 per dollar. Malaysia’s ringgit fell 0.5 percent.
Asian Currencies
“It’s going to be a negative day for Asian currencies,” said Dariusz Kowalczyk, Hong Kong-based senior economist at Credit Agricole CIB. “We’ve seen a pretty substantial increase in global risk aversion, particularly from the U.S., which led investors to pare long positions in risk assets.”
The yen was little changed against the euro at 111.88 from 111.96 in New York last week, after earlier rising to 111.53, the strongest since July 13.
Australia’s dollar fell to a one-week low after Prime Minister Julia Gillard called an election, prompting speculation the central bank will refrain from raising interest rates during the campaign. Australia’s currency fell as much as 0.6 percent to 86.33 U.S. cents.
The cost of protecting Asian bonds from default surged. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan climbed 9 basis points to 137 basis points as of 8:23 a.m. in Singapore, the biggest jump since June 4, prices from Credit Agricole CIB and CMA show.
Oil for August delivery dropped as much as 51 cents, or 0.7 percent, to $75.50 a barrel on the New York Mercantile Exchange and traded at $75.82 at 11:13 a.m. Singapore time.
Treasury Bids Rise 18% as Investors Surpass Dealers
July 19 (Bloomberg) -- For the first time since the government started collecting the data, central banks, mutual funds and U.S. banks are buying more government securities at Treasury auctions than Wall Street’s bond dealers.
Foreign and domestic investors bidding directly at note and bond auctions bought 57 percent of the $1.26 trillion in Treasuries sold by the government this year, up from 45 percent during the same period in 2009 and as little as 32 percent for all of 2008, according to government data compiled by Bloomberg. Bids compared with the amount of debt sold, the bid-to-cover ratio, rose 18 percent from last year’s 14-year high, according to data that Treasury started collecting in 1994.
The combination of the lowest U.S. inflation rate in four decades and continuing concerns that the global recovery will falter is boosting bonds even as yields on 10-year notes fall below 3 percent, the lowest since April 2009. The surge in demand through so-called direct and indirect bids is helping drive down rates for U.S. President Barack Obama as he grapples with a budget deficit that’s forecast to swell 14 percent to a record $1.6 trillion.
“The economic backdrop is favorable for Treasuries,” said Thomas Girard, who helps manage $115 billion in fixed income at New York Life Investment Management in New York. “There’s no fear of inflation. The bigger fear is deflation.”
Consumer Confidence Tumbles
Yields on 10-year notes fell 13 basis points last week to 2.92 percent, according to BGCantor Market Data. That’s 88 basis points above the record low of 2.04 percent reached on Dec. 18, 2008, after the collapse of New York-based Lehman Brothers Holdings Inc. spurred investors to seek only the safest government securities.
The two-year yield dropped to an all-time low of 0.577 percent on July 16 as a report showed confidence among U.S. consumers tumbled to the lowest level in a year.
Trading of bills, notes and bonds was shut in Japan today for a holiday.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66.5, the lowest since August and less than the most pessimistic forecast of economists surveyed by Bloomberg News. Consumer prices excluding energy and food remained at a 44-year low of 0.9 percent in June for a third consecutive month, the Labor Department said the same day.
The drop in sentiment followed the Labor Department’s July 2 report showing that the U.S. lost 125,000 jobs in June, the first decline since December. Retail sales excluding autos have slid for two consecutive months for the first time since 2008, while new home sales plunged to a record low in May after reaching a 20-month high of 446,000 in April.
U.S. GDP
The American economy grew 2.7 percent in the first three months of 2010, expanding for a third straight quarter after the longest recession since the Great Depression. U.S. gross domestic product will increase 3.1 percent this year, according to estimates from 54 economists compiled by Bloomberg.
“The data shift that we had from the first quarter to the second quarter has been fairly dramatic and came sooner than many investors would have expected,” said Eric Pellicciaro, New York-based head of global rates investments at BlackRock Inc., which manages about $1 trillion in bonds. “Treasuries are still attractive.”
Even bond-market bears such as primary dealer Morgan Stanley have trimmed forecasts for U.S. yields to rise in the second half of the year, with slow growth likely to keep the Federal Reserve from increasing record low borrowing rates into 2011. The target for overnight loans between banks has been zero to 0.25 percent since December 2008.
Primary Dealers
Morgan Stanley of New York has lowered its estimate for the 10-year note’s yield at the end of the 2010 to 3.5 percent from 5.5 percent at the start the year. The median projection of 55 forecasts in a Bloomberg News survey is 3.36 percent, down from 3.80 percent in June.
Primary dealers, which are required to bid in government auctions and act as the trading partner to the New York Fed, have won the lowest proportion of Treasuries in auctions since the government began releasing the data in 2003.
Increasing demand for longer-term debt from central banks moving out of the euro and into dollar assets has helped keep yields low, said Jeffrey Rosenberg, a credit strategist at Charlotte, North Carolina-based Bank of America Corp. China holds $867.7 billion of Treasuries, making it the biggest lender to the U.S.
“The auction participation data and the holdings data show an increase in holdings in the long-term,” said Rosenberg. International investors have displayed “comfort with moving out the curve,” he said.
China’s Holdings
Purchases by China in recent months have focused on longer- term debt, unlike in 2008, when most of the cash went into Treasury bills. While China has slashed its bill holdings by nine-tenths to $6.8 billion as the global credit crunch eased, total holdings are up 8.3 percent in the 12 months through May, with notes and bonds due in two years or more surging 46 percent, the Treasury said July 16.
Custodial holdings of Treasuries at the Fed for accounts including central banks have increased 4.7 percent this year to a record $2.29 trillion.
“This has been a pretty ferocious flight-to-quality,” said Wan-Chong Kung, who helps manage $89 billion at FAF Advisors in Minneapolis, the asset-management arm of U.S. Bancorp. “Investors more broadly are embracing the idea of a slower U.S. economy where inflation is not a problem.”
‘Paralyzed With Uncertainty’
Spending by companies and consumers has slowed as economic data has shown signs of weakening. Companies in the Standard & Poor’s 500 Index have stockpiled a record $2.3 trillion of cash and equivalents. At the same time, consumer credit has declined in 15 of the last 16 months, while factory orders fell 1.4 percent in May, the biggest drop in 14 months, the Commerce Department said.
Companies “are paralyzed with uncertainty,” said Barr Segal, a managing director at Los Angeles-based TCW Group Inc., who helps oversee $72 billion in fixed-income assets. “They’re sitting on cash. There’s a lot of powder there that’s going nowhere. It is in a way deflationary.”
Almost 87 percent of the 23 companies in the S&P 500 that reported earnings since July 12, including Alcoa Inc. of New York and Santa Clara, California-based Intel Corp., have beaten analysts’ forecasts for earnings per share, data compiled by Bloomberg show. General Electric Co. in Fairfield, Connecticut, Bank of America and four other companies reported sales that trailed projections.
Earnings Projections
While analyst estimates compiled by Bloomberg show that profits at S&P 500 companies are forecast to increase by 34 percent in 2010 and 18 percent in 2011, investors remain concerned the earnings expansion is being driven by cost reductions rather than sales growth, Segal said.
Investment funds and U.S. banks have been among the biggest direct buyers of Treasuries this year. Banks held $1.48 trillion in Treasuries and agency debt as of June 30, up 2.1 percent from the end of 2009, according to Fed data.
Depository institutions bought $1.2 billion of the $13 billion in 30-year U.S. bonds auctioned on June 10, $3.1 billion of those offered on March 11 and $2.7 billion of the $16 billion sale on Feb. 11, Treasury data show.
“There is definitely a sense that banks are reluctant to lend and are parking reserves either at the Fed, in Treasuries or other non-consumer lending assets,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “Banks have tightened their standards and even if their standards remained the same, the position of consumers has deteriorated with the economy under stress. It’s more difficult to get a car loan, it’s more difficult to get a mortgage.”
Auctions Peak
Company borrowing slid 29 percent in the first half of the year to $528 billion amid a dearth of business investment, Bloomberg data shows.
The drop in debt issuance comes with Treasury auctions starting to decline after reaching record levels. Monthly fixed- coupon sales of Treasuries decreased 7.3 percent to $178 billion in June from $192 billion in April.
Primary dealers told U.S. officials in February that the increase in direct bids from investors at auctions risked distorting prices in the $7 trillion market for U.S. government debt, according to people involved in the discussions at the time. The firms said the rise in direct bids may increase borrowing costs for the Treasury and taxpayers if dealers bid less aggressively because of higher volatility at the sales.
‘Bidding Behavior’
“The change in bidding behavior should increase the volatility around auctions,” Joe Leary and Brett Rose, New York-based strategists at primary dealer Citigroup Inc., wrote in a July 14 report. “A counter effect that comes along with an increased number of direct bidders is increased competition. This recent change in auction behavior may not be completely adverse for Treasury borrowing costs.”
The U.S. deficit rose $68.4 billion in June to $1 trillion for the fiscal year that ends Sept. 30, the government said July 13. Tax receipts have increased 0.5 percent to $1.6 trillion while spending has declined 2.8 percent to $2.6 trillion.
The S&P 500, the benchmark gauge for U.S. equities, has fallen 4.5 percent this year while Treasuries have risen 6.2 percent, according to Bank of America Merrill Lynch indexes.
Globally, bond returns topped stock gains by the widest margin in nine years in the first half as optimism about the global economic recovery waned.
The MSCI World Index of 24 developed countries fell 9.5 percent, including dividends, in the first half of 2010, while bonds gained 4.2 percent, the Bank of America Merrill Lynch Global Broad Market Index shows.
“The bond market has finally come to the conclusion that we’re going to have shallow growth and low inflation for years to come,” said George Goncalves, head of interest-rate strategy at Nomura Holdings Inc. in New York. “That’s being manifested in the auction process. It’s a bullish environment for Treasuries.”
Foreign and domestic investors bidding directly at note and bond auctions bought 57 percent of the $1.26 trillion in Treasuries sold by the government this year, up from 45 percent during the same period in 2009 and as little as 32 percent for all of 2008, according to government data compiled by Bloomberg. Bids compared with the amount of debt sold, the bid-to-cover ratio, rose 18 percent from last year’s 14-year high, according to data that Treasury started collecting in 1994.
The combination of the lowest U.S. inflation rate in four decades and continuing concerns that the global recovery will falter is boosting bonds even as yields on 10-year notes fall below 3 percent, the lowest since April 2009. The surge in demand through so-called direct and indirect bids is helping drive down rates for U.S. President Barack Obama as he grapples with a budget deficit that’s forecast to swell 14 percent to a record $1.6 trillion.
“The economic backdrop is favorable for Treasuries,” said Thomas Girard, who helps manage $115 billion in fixed income at New York Life Investment Management in New York. “There’s no fear of inflation. The bigger fear is deflation.”
Consumer Confidence Tumbles
Yields on 10-year notes fell 13 basis points last week to 2.92 percent, according to BGCantor Market Data. That’s 88 basis points above the record low of 2.04 percent reached on Dec. 18, 2008, after the collapse of New York-based Lehman Brothers Holdings Inc. spurred investors to seek only the safest government securities.
The two-year yield dropped to an all-time low of 0.577 percent on July 16 as a report showed confidence among U.S. consumers tumbled to the lowest level in a year.
Trading of bills, notes and bonds was shut in Japan today for a holiday.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66.5, the lowest since August and less than the most pessimistic forecast of economists surveyed by Bloomberg News. Consumer prices excluding energy and food remained at a 44-year low of 0.9 percent in June for a third consecutive month, the Labor Department said the same day.
The drop in sentiment followed the Labor Department’s July 2 report showing that the U.S. lost 125,000 jobs in June, the first decline since December. Retail sales excluding autos have slid for two consecutive months for the first time since 2008, while new home sales plunged to a record low in May after reaching a 20-month high of 446,000 in April.
U.S. GDP
The American economy grew 2.7 percent in the first three months of 2010, expanding for a third straight quarter after the longest recession since the Great Depression. U.S. gross domestic product will increase 3.1 percent this year, according to estimates from 54 economists compiled by Bloomberg.
“The data shift that we had from the first quarter to the second quarter has been fairly dramatic and came sooner than many investors would have expected,” said Eric Pellicciaro, New York-based head of global rates investments at BlackRock Inc., which manages about $1 trillion in bonds. “Treasuries are still attractive.”
Even bond-market bears such as primary dealer Morgan Stanley have trimmed forecasts for U.S. yields to rise in the second half of the year, with slow growth likely to keep the Federal Reserve from increasing record low borrowing rates into 2011. The target for overnight loans between banks has been zero to 0.25 percent since December 2008.
Primary Dealers
Morgan Stanley of New York has lowered its estimate for the 10-year note’s yield at the end of the 2010 to 3.5 percent from 5.5 percent at the start the year. The median projection of 55 forecasts in a Bloomberg News survey is 3.36 percent, down from 3.80 percent in June.
Primary dealers, which are required to bid in government auctions and act as the trading partner to the New York Fed, have won the lowest proportion of Treasuries in auctions since the government began releasing the data in 2003.
Increasing demand for longer-term debt from central banks moving out of the euro and into dollar assets has helped keep yields low, said Jeffrey Rosenberg, a credit strategist at Charlotte, North Carolina-based Bank of America Corp. China holds $867.7 billion of Treasuries, making it the biggest lender to the U.S.
“The auction participation data and the holdings data show an increase in holdings in the long-term,” said Rosenberg. International investors have displayed “comfort with moving out the curve,” he said.
China’s Holdings
Purchases by China in recent months have focused on longer- term debt, unlike in 2008, when most of the cash went into Treasury bills. While China has slashed its bill holdings by nine-tenths to $6.8 billion as the global credit crunch eased, total holdings are up 8.3 percent in the 12 months through May, with notes and bonds due in two years or more surging 46 percent, the Treasury said July 16.
Custodial holdings of Treasuries at the Fed for accounts including central banks have increased 4.7 percent this year to a record $2.29 trillion.
“This has been a pretty ferocious flight-to-quality,” said Wan-Chong Kung, who helps manage $89 billion at FAF Advisors in Minneapolis, the asset-management arm of U.S. Bancorp. “Investors more broadly are embracing the idea of a slower U.S. economy where inflation is not a problem.”
‘Paralyzed With Uncertainty’
Spending by companies and consumers has slowed as economic data has shown signs of weakening. Companies in the Standard & Poor’s 500 Index have stockpiled a record $2.3 trillion of cash and equivalents. At the same time, consumer credit has declined in 15 of the last 16 months, while factory orders fell 1.4 percent in May, the biggest drop in 14 months, the Commerce Department said.
Companies “are paralyzed with uncertainty,” said Barr Segal, a managing director at Los Angeles-based TCW Group Inc., who helps oversee $72 billion in fixed-income assets. “They’re sitting on cash. There’s a lot of powder there that’s going nowhere. It is in a way deflationary.”
Almost 87 percent of the 23 companies in the S&P 500 that reported earnings since July 12, including Alcoa Inc. of New York and Santa Clara, California-based Intel Corp., have beaten analysts’ forecasts for earnings per share, data compiled by Bloomberg show. General Electric Co. in Fairfield, Connecticut, Bank of America and four other companies reported sales that trailed projections.
Earnings Projections
While analyst estimates compiled by Bloomberg show that profits at S&P 500 companies are forecast to increase by 34 percent in 2010 and 18 percent in 2011, investors remain concerned the earnings expansion is being driven by cost reductions rather than sales growth, Segal said.
Investment funds and U.S. banks have been among the biggest direct buyers of Treasuries this year. Banks held $1.48 trillion in Treasuries and agency debt as of June 30, up 2.1 percent from the end of 2009, according to Fed data.
Depository institutions bought $1.2 billion of the $13 billion in 30-year U.S. bonds auctioned on June 10, $3.1 billion of those offered on March 11 and $2.7 billion of the $16 billion sale on Feb. 11, Treasury data show.
“There is definitely a sense that banks are reluctant to lend and are parking reserves either at the Fed, in Treasuries or other non-consumer lending assets,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “Banks have tightened their standards and even if their standards remained the same, the position of consumers has deteriorated with the economy under stress. It’s more difficult to get a car loan, it’s more difficult to get a mortgage.”
Auctions Peak
Company borrowing slid 29 percent in the first half of the year to $528 billion amid a dearth of business investment, Bloomberg data shows.
The drop in debt issuance comes with Treasury auctions starting to decline after reaching record levels. Monthly fixed- coupon sales of Treasuries decreased 7.3 percent to $178 billion in June from $192 billion in April.
Primary dealers told U.S. officials in February that the increase in direct bids from investors at auctions risked distorting prices in the $7 trillion market for U.S. government debt, according to people involved in the discussions at the time. The firms said the rise in direct bids may increase borrowing costs for the Treasury and taxpayers if dealers bid less aggressively because of higher volatility at the sales.
‘Bidding Behavior’
“The change in bidding behavior should increase the volatility around auctions,” Joe Leary and Brett Rose, New York-based strategists at primary dealer Citigroup Inc., wrote in a July 14 report. “A counter effect that comes along with an increased number of direct bidders is increased competition. This recent change in auction behavior may not be completely adverse for Treasury borrowing costs.”
The U.S. deficit rose $68.4 billion in June to $1 trillion for the fiscal year that ends Sept. 30, the government said July 13. Tax receipts have increased 0.5 percent to $1.6 trillion while spending has declined 2.8 percent to $2.6 trillion.
The S&P 500, the benchmark gauge for U.S. equities, has fallen 4.5 percent this year while Treasuries have risen 6.2 percent, according to Bank of America Merrill Lynch indexes.
Globally, bond returns topped stock gains by the widest margin in nine years in the first half as optimism about the global economic recovery waned.
The MSCI World Index of 24 developed countries fell 9.5 percent, including dividends, in the first half of 2010, while bonds gained 4.2 percent, the Bank of America Merrill Lynch Global Broad Market Index shows.
“The bond market has finally come to the conclusion that we’re going to have shallow growth and low inflation for years to come,” said George Goncalves, head of interest-rate strategy at Nomura Holdings Inc. in New York. “That’s being manifested in the auction process. It’s a bullish environment for Treasuries.”
UK boosts Afghan aid to speed troop exit
UK spending on aid projects in Afghanistan is to rise by 40 per cent as the government attempts to set a path for withdrawing troops from the country by 2015.
Andrew Mitchell, the international development secretary, said on Sunday that securing progress in the country was his “number one priority” at the same time as he indicated that other countries such as India could receive far less of the £7.3bn of the international aid budget.
The decision by David Cameron, the prime minister, to prioritise Afghanistan for extra spending is part of a push to use international development as a way of bolstering national security and military objectives.
British forces suffered four deaths in a 24-hour period over the weekend, bringing to 322 the number of UK soldiers killed since the conflict began in 2001.
Mr Cameron and Sir David Richards, the new chief of defence staff, both believe that the US and UK must make greater efforts to make political progress in Afghanistan alongside the security effort, with aid projects a crucial way of winning local support.
Sir David has said the military mission will have “failed” if troops are not withdrawn by 2015, though Liam Fox, the defence secretary, said “non-combat” troops could remain beyond that date.
Mr Fox has said previously that Britain was only in Afghanistan to safeguard its own national security rather than to support the redevelopment of the country.
In a speech on Monday, Mr Mitchell will say “well-spent aid” in Afghanistan is in the UK’s interest because it promotes political progress and supports the military’s work to bring security and peace to the country.
”While the military bring much-needed security, peace will only be achieved by political progress backed by development,” he will say.
The government has already committed £500m on Afghan aid projects over the next five years. Mr Mitchell said an “aid watchdog” would oversee the programme after accusations that previous projects had proved ineffective.
Spending will be targeted at education, policing, emergency food and medicine, and jobs and training.
In a Sunday interview for the BBC’s Politics Show, Mr Mitchell said the government had looked “very carefully” at how money was being spent in Afghanistan. ”We’ve found some additional funding from less good programmes, so in principle we have an additional 40 per cent going into the development budget,” he said.
His department is reviewing how it spend its £7.3bn aid budget and has already said some countries, such as China and Russia, will no longer receive it. Aid to India is also being looked at as the country “roars out of poverty”, Mr Mitchell said.
Andrew Mitchell, the international development secretary, said on Sunday that securing progress in the country was his “number one priority” at the same time as he indicated that other countries such as India could receive far less of the £7.3bn of the international aid budget.
The decision by David Cameron, the prime minister, to prioritise Afghanistan for extra spending is part of a push to use international development as a way of bolstering national security and military objectives.
British forces suffered four deaths in a 24-hour period over the weekend, bringing to 322 the number of UK soldiers killed since the conflict began in 2001.
Mr Cameron and Sir David Richards, the new chief of defence staff, both believe that the US and UK must make greater efforts to make political progress in Afghanistan alongside the security effort, with aid projects a crucial way of winning local support.
Sir David has said the military mission will have “failed” if troops are not withdrawn by 2015, though Liam Fox, the defence secretary, said “non-combat” troops could remain beyond that date.
Mr Fox has said previously that Britain was only in Afghanistan to safeguard its own national security rather than to support the redevelopment of the country.
In a speech on Monday, Mr Mitchell will say “well-spent aid” in Afghanistan is in the UK’s interest because it promotes political progress and supports the military’s work to bring security and peace to the country.
”While the military bring much-needed security, peace will only be achieved by political progress backed by development,” he will say.
The government has already committed £500m on Afghan aid projects over the next five years. Mr Mitchell said an “aid watchdog” would oversee the programme after accusations that previous projects had proved ineffective.
Spending will be targeted at education, policing, emergency food and medicine, and jobs and training.
In a Sunday interview for the BBC’s Politics Show, Mr Mitchell said the government had looked “very carefully” at how money was being spent in Afghanistan. ”We’ve found some additional funding from less good programmes, so in principle we have an additional 40 per cent going into the development budget,” he said.
His department is reviewing how it spend its £7.3bn aid budget and has already said some countries, such as China and Russia, will no longer receive it. Aid to India is also being looked at as the country “roars out of poverty”, Mr Mitchell said.
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