June 17 (Bloomberg) -- President Barack Obama offered stern words for Wall Street and a prediction of 10 percent U.S. unemployment even as he said the “engines” of an economic recovery have begun to turn.
“Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected,” Obama said, referring to criticism of the government’s growing role in the economy and markets.
Obama, in an interview with Bloomberg News on the eve of the release of his plan to revamp financial-market regulation, voiced confidence the economy would recover soon, while warning that robust growth was needed if the U.S. is to rein in its budget deficit without raising taxes on most Americans.
“You’re starting to see the engines of the economy turn,” Obama said. Still, he said, “It’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real estate boom.
The jobless rate will continue to climb from its current 25-year high of 9.4 percent as employers are slow to take on new workers, the president said. “Jobs are a lagging indicator,” he said, while adding that he didn’t have “a crystal ball” to predict when unemployment will start to decline.
Praise for Bernanke
Obama, 47, gave high marks to Federal Reserve Chairman Ben S. Bernanke for his role in fighting the financial crisis. Bernanke “has done an extraordinary job under extraordinary circumstances,” the president said during the interview in the East Room of the White House. He declined to say whether he would nominate Bernanke, 55, for another four-year term when his tenure runs out in January.
Ahead of today’s regulatory announcement expected at 12:50 p.m. in Washington, Obama pledged to make the derivatives market, which he called a system of “enormous risk,” more transparent. He also said it is important for the U.S. to maintain fiscal discipline to ensure investors in China and around the world keep buying U.S. government debt.
“The No. 1 risk of the next crisis would be that the foreign lenders take a look at this situation and decide it’s too risky,” said Peter G. Peterson, senior chairman of Blackstone Group International Ltd.
While expressing confidence in the long-term prospects for the economy, the president stressed the necessity of making tough reforms, including overhauling the health-care system, to generate the growth needed to reduce the budget deficit.
Growth and Taxes
He left open the possibility he would have to raise taxes on most Americans to decrease the deficit if growth were too weak. He also indicated he might tax the most-expensive employer-provided benefits to help pay for his health-care revamp. Both would reverse pledges he made during the campaign.
“If we are growing at a robust rate, then we can pay for the government that we need without having to raise taxes,” Obama said. “If we’ve got anemic growth, if we don’t have a strategy for recovery without bubbles, which is essentially what we’ve had over the last couple of recovery cycles, then we’re going to continue to have problems.”
The president has repeatedly said he would keep his presidential campaign pledge to cut taxes for 95 percent of working Americans while rolling back tax breaks for households making more than $250,000 a year.
During the campaign, Obama opposed taxing employer-provided health-care benefits, a proposal gaining traction among Senate Democrats to pay for a $1 trillion health-care plan.
He said he preferred other means of funding the legislation, including reducing itemized deductions for the wealthiest Americans and focusing on cutting health-care costs.
‘Vigorous Debate’
Still, he said, “Congress is having a vigorous debate on the Hill, and I don’t want to predetermine the best way to do this.”
“I’ve already put forward what I think is the best way, but let me see what comes out of the Hill,” Obama said.
Only five months into a presidency that inherited the worst financial meltdown since the 1930s, Obama’s self-described “extraordinary” actions to stem the crisis have reached a critical juncture. He will now be tested less on his crisis- management skills and more on the policies that have extended the government’s reach into private industry.
Obama is assuming ownership of his bank-bailout plan, $787 billion economic-stimulus package, auto-industry restructuring and proposals to revise financial-market regulations.
New Terrain
He is also navigating new terrain as a steward of some of the best-known corporations, from General Motors Corp. to Citigroup Inc., asserting the kind of control unseen since former president Harry Truman tried to force action on the steel industry in 1952.
Obama has set a goal by the end of this year to complete legislation to curb climate change as well as overhaul health care. On foreign policy, he is picking up where past presidents have failed -- to reignite an Israeli-Palestinian peace deal, as he confronts foreign policy crises from Iran to North Korea to Pakistan.
The president comes at these challenges with a 67 percent approval rating, putting him above former presidents George W. Bush and Bill Clinton at the same point in their presidencies, according to the latest Gallup polling.
In a sign of the high stakes, Obama stepped up his sales pitch. Yesterday’s series of interviews as well as a Rose Garden press conference on North Korea that also touched on Iran and his regulatory, economic and health-care proposals followed his June 15 address before the American Medical Association in Chicago and a June 11 Wisconsin town hall on health care.
Financial Regulations
The president today will announce his proposal for revamping financial regulation. Many of the changes must be approved by Congress, where jurisdictional and ideological clashes may shape the final legislation.
Crafted by Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers, the plan would put the Federal Reserve in charge of regulating companies whose collapse could damage the entire financial system. It would also create a new agency to oversee consumer financial products, such as mortgages and credit cards.
The proposal encompasses areas ranging from derivatives to executive pay to the mortgage-backed securities that helped fuel the housing boom and touch off the credit crisis.
“Derivatives are a huge potential risk to the system,” he said. “We are going to make sure that they have to register, that they are regulated, that you have clearinghouses.”
Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.
Role in Economy
The president also said he would like the government to get out of the economy when it can.
“As soon as this economy has stabilized, we want the market to do what it does best, and that is produce jobs, invest,” he said.
He brushed aside concerns that the rise in Treasury bond yields would stifle an economic recovery by pushing up borrowing costs for homebuyers. The 10-year Treasury note yield has increased 0.57 percentage point since May 14.
Obama said Treasury yields are rising because investors have grown “more confident that we may have avoided the very worst scenarios” for the economy and are putting their money into investments with higher returns.
Skittish Investors
Still, he warned that long-term deficits would deter international investors, including China, which holds $767.9 billion of U.S. debt. China has already shifted purchases of Treasuries into shorter-maturity securities amid concern about unprecedented debt sales.
“There’s no doubt that, at some point, you know, whether it’s the Chinese, the Koreans, the Japanese, whoever else has been snatching up Treasuries are going to decide that this is too much of a risk,” Obama said.
The Standard & Poor’s 500 Index has gained 15 percent since Obama’s Jan. 20 inauguration, compared with a decline of 9.6 percent in the first five months of the Bush administration and an increase of 3 percent under Clinton. Corporate bonds have returned 11.5 percent, according to Merrill Lynch & Co. index data, and companies have sold about $680 billion of debt, a record pace, Bloomberg data show.
The president said his plan to re-regulate markets would include a “systemic regulator” to oversee the “entire financial system” and catch risky activity “before the crisis occurs.”
His toughest language was reserved for those on Wall Street who criticize his administration for putting too many restrictions on aid, including limits on executive compensation.
“When I hear some of the commentary that’s been creeping up about, “You know, it’s time for government to get out of the economy. And what’s the Obama administration doing?’ I have to try to remind them -- all we’re doing is cleaning up after the mess that was made,” Obama said.
Tuesday, June 16, 2009
Monday, June 15, 2009
Principles that must guide new financial regulation
Published: June 16 2009 03:00 | Last updated: June 16 2009 03:00
When the Obama administration releases a framework for reform of US financial regulation tomorrow - accompanied by announcements in the European Union and other financial centres - it will be the first step in the most significant regulatory overhaul since the Great Depression. As proposals give way to the rough-and-tumble of the legislative process, lawmakers should be mindful of certain core principles that are integral to the fair and efficient functioning of financial markets.
Now is the time to overhaul the financial regulatory structure. Simply put, the current system failed to identify systemic risks, much less manage them. It proved incapable of protecting investors or even recognising the magnitude of the threat they faced. It is a system characterised by confusing overlaps in some areas and perilous gaps in others.
Today's regulatory structure evolved in piecemeal fashion over the past eight decades, with short-term responses to successive financial crises heaped one atop another. Getting our regulatory house in order requires constructing a new foundation, rather than taping broken windows and patching cracked walls.
What principles should frame a truly modern and proactive regulatory architecture of the 21st century?
First, financial regulatory reform must protect investors and restore investor confidence. That demands a new approach to regulation. Innovative financial instruments blend elements of equity, debt and insurance - but regulators today only focus on their own specific area of responsibility. We must close the gaps, ensuring all market functions are supervised by an appropriate regulator. This is crucial if we are to ensure that no single institution is large enough to threaten the entire system.
Second, financial oversight must be rationalised and harmonised. Seven federal regulators with overlapping missions and fragmented supervision oversee US markets and financial institutions. Increasingly, government officials and experts in banking law recognise that the US needs a single, strong prudential regulator to ensure the safety and soundness of our banking system, reduce the problem of "too big to fail" and provide true accountability. Both Tim Geithner, Treasury secretary, and his predecessor have proposed consolidation of bank regulation. It is time to act.
Today's financial markets are increasingly borderless and US regulators must work in harmony with their counterparts around the world. This could be accomplished by establishing a strengthened Financial Stability Board, which the Obama administration and the Group of 20 have recommended.
Third, a new system must bring complex financial instruments out of the shadows. What cannot be seen cannot be regulated properly. The solution: trade standardised deriv-atives on regulated exchanges rather than opaque over-the-counter markets, as Mr Geithner has proposed.
Lack of transparency contributed mightily to the seizure of credit markets, as investors struggled to properly price and analyse risk. Many financial institutions still do not fully understand the exact composition and value of the financial products that have wrecked their balance sheets. Regulated exchanges have a track record of transparency and reliability that served investors well through many periods of market disruption.
Fourth, a new regulatory system must stress smarter regulation, not over-regulation. Quality, not quantity, is the test. With 39,000 employees of financial regulatory agencies, the US already has more than 12 times as many regulatory personnel as the UK's 3,100, although its gross domestic product is only seven times bigger. Simply adding regulators to this existing army would not have prevented the meltdown.
Regulatory overreaction would limit access to capital markets, dampening the entrepreneurial energy that is critical to any sustained economic recovery. It would also drive companies and jobs to overseas markets. Investors, businesses small and large, and our financial markets cannot afford regulatory overkill.
The administration's enthusiasm for reform is a hopeful sign that a modernised regulatory structure is achievable, but it will take bold leadership to ensure that the principles necessary for this reform survive the coming legislative battle.
When the Obama administration releases a framework for reform of US financial regulation tomorrow - accompanied by announcements in the European Union and other financial centres - it will be the first step in the most significant regulatory overhaul since the Great Depression. As proposals give way to the rough-and-tumble of the legislative process, lawmakers should be mindful of certain core principles that are integral to the fair and efficient functioning of financial markets.
Now is the time to overhaul the financial regulatory structure. Simply put, the current system failed to identify systemic risks, much less manage them. It proved incapable of protecting investors or even recognising the magnitude of the threat they faced. It is a system characterised by confusing overlaps in some areas and perilous gaps in others.
Today's regulatory structure evolved in piecemeal fashion over the past eight decades, with short-term responses to successive financial crises heaped one atop another. Getting our regulatory house in order requires constructing a new foundation, rather than taping broken windows and patching cracked walls.
What principles should frame a truly modern and proactive regulatory architecture of the 21st century?
First, financial regulatory reform must protect investors and restore investor confidence. That demands a new approach to regulation. Innovative financial instruments blend elements of equity, debt and insurance - but regulators today only focus on their own specific area of responsibility. We must close the gaps, ensuring all market functions are supervised by an appropriate regulator. This is crucial if we are to ensure that no single institution is large enough to threaten the entire system.
Second, financial oversight must be rationalised and harmonised. Seven federal regulators with overlapping missions and fragmented supervision oversee US markets and financial institutions. Increasingly, government officials and experts in banking law recognise that the US needs a single, strong prudential regulator to ensure the safety and soundness of our banking system, reduce the problem of "too big to fail" and provide true accountability. Both Tim Geithner, Treasury secretary, and his predecessor have proposed consolidation of bank regulation. It is time to act.
Today's financial markets are increasingly borderless and US regulators must work in harmony with their counterparts around the world. This could be accomplished by establishing a strengthened Financial Stability Board, which the Obama administration and the Group of 20 have recommended.
Third, a new system must bring complex financial instruments out of the shadows. What cannot be seen cannot be regulated properly. The solution: trade standardised deriv-atives on regulated exchanges rather than opaque over-the-counter markets, as Mr Geithner has proposed.
Lack of transparency contributed mightily to the seizure of credit markets, as investors struggled to properly price and analyse risk. Many financial institutions still do not fully understand the exact composition and value of the financial products that have wrecked their balance sheets. Regulated exchanges have a track record of transparency and reliability that served investors well through many periods of market disruption.
Fourth, a new regulatory system must stress smarter regulation, not over-regulation. Quality, not quantity, is the test. With 39,000 employees of financial regulatory agencies, the US already has more than 12 times as many regulatory personnel as the UK's 3,100, although its gross domestic product is only seven times bigger. Simply adding regulators to this existing army would not have prevented the meltdown.
Regulatory overreaction would limit access to capital markets, dampening the entrepreneurial energy that is critical to any sustained economic recovery. It would also drive companies and jobs to overseas markets. Investors, businesses small and large, and our financial markets cannot afford regulatory overkill.
The administration's enthusiasm for reform is a hopeful sign that a modernised regulatory structure is achievable, but it will take bold leadership to ensure that the principles necessary for this reform survive the coming legislative battle.
Asian Stocks Drop on Growth Concerns; Yen, Treasuries Advance
June 16 (Bloomberg) -- Asian stocks fell, giving the MSCI Asia Pacific Index its biggest drop in a month, after a New York manufacturing report missed economist estimates and commodity prices sank. The yen strengthened and Treasuries rose.
Toyota Motor Corp., the world’s No. 1 automaker, fell 2.6 percent in Tokyo. Sony Corp., which gets 24 percent of its sales from the U.S., retreated 2.7 percent. PetroChina Co., China’s biggest oil producer, fell 4.7 percent in Hong Kong and Rio Tinto Group, the world’s third-largest mining company, slumped 4.2 percent in Sydney as oil and copper prices fell. Declines in Asia extended a global slump that dragged the MSCI World Index down by the most in two months yesterday.
“Some may have believed that the deterioration of the global economy had ended, but that’s not the case,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $52 billion in Tokyo. “Those who bought stocks on a perception the economy would improve are now selling on reality.”
The MSCI Asia Pacific Index sank 2.2 percent to 101.30 as of 12:57 p.m. in Tokyo, the biggest drop since May 14. The gauge has surged 44 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
Japan’s Nikkei 225 Stock Average fell 2.6 percent to 9,781.30 as the central bank left the overnight lending rate unchanged at 0.1 percent today. Hong Kong’s Hang Seng Index slumped 3.2 percent.
The Kospi Index dropped 1.1 percent in Seoul as MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, left South Korea unchanged as an emerging market. The country, the Asia Pacific’s sixth-largest stock market, had been under review for an upgrade to developed status.
Manufacturing Contraction
Konica Minolta Holdings Inc., which makes printers, slumped 6.2 percent in Tokyo after Credit Suisse Group AG downgraded the stock. Australia’s Nufarm Ltd., which supplies farm chemicals, sank 12 percent after cutting its profit target. Among stocks that rose today, Macquarie Communications Infrastructure Group surged 26 percent after receiving an increased takeover bid.
Futures on the Standard & Poor’s 500 Index dropped 0.1 percent. The gauge slid 2.4 percent yesterday, the most since May 13, as the Federal Reserve Bank of New York’s general economic index fell to minus 9.4 in June from minus 4.6 the previous month. Economists in a Bloomberg survey had expected the gauge to stay unchanged. Readings below zero for the index signal manufacturing is shrinking.
‘Moderate’ Recovery
The New York data was the latest in a string of figures that have made some investors more cautious on economic growth prospects. Japan’s government reported on June 8 that the country’s current-account surplus narrowed in April as exports slumped. Overseas shipments declined 26.4 percent last month from a year earlier, China’s customs bureau said on June 11.
“Investors expected the global economy will recover at a fairly fast pace, but this view is changing to one that a recovery will remain moderate,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Toyota, which gets 31 percent of its revenue from North America, sank 2.6 percent to 3,730 yen. Sony, the maker of the PlayStation 3, lost 2.7 percent to 2,560 yen.
Japanese exporters also fell as the yen’s gains against all 16 of the most-traded currencies threatened the value of overseas sales. The currency advanced 0.9 percent to 133.83 per euro after climbing to 133.24, the highest level since May 28. It rose to 96.96 per dollar from 97.84.
Safe Havens
Treasuries and the yen rose as the decline in stocks increased demand for safer assets. Treasuries gained for a fourth day, the longest winning streak in five months. The yield on the benchmark 10-year note fell two basis points to 3.69 percent according to BGCantor Market data.
PetroChina slumped 4.7 percent to HK$8.57 as crude oil fell today for the third-straight day in New York. Cnooc Ltd., China’s largest offshore oil producer, dropped 5.3 percent to HK$9.93.
Rio Tinto slumped 4.2 percent to A$72.33 after copper futures dropped 3.6 percent in New York yesterday, the most in almost two weeks. BHP Billiton Ltd., the world’s biggest mining company, fell 1.8 percent to A$36.33.
Materials and energy stocks are the best performing of the MSCI Asia Pacific Index’s 10 industries in the past month as investors bet demand for raw materials will pick up as the global economy recovers. The International Monetary Fund raised its growth forecast for the U.S. economy yesterday.
Rising Valuations
“The green shoots of an economic turnaround continue to appear, but the question is whether markets have priced in a bumper harvest,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “People are now turning their attention to the appropriateness of stock prices.”
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. The rally since March has driven the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since Sept. 26, according to Bloomberg data.
Konica Minolta fell 6.2 percent to 980 yen, paring its climb in the past six months to 43 percent. Credit Suisse Group lowered its recommendation to “underperform” from “neutral” saying the shares may have “overheated.”
Nufarm tumbled 12 percent to A$10.68 after it cut its earnings forecast on lower-than-expected weed killer sales.
Macquarie Communications, which invests in television and radio-transmission towers, surged 26 percent to A$2.93. Canada Pension Plan Investment Board raised its offer for the company by 20 percent after shareholders threatened to block the purchase.
Berjaya Sports Toto Bhd., Malaysia’s biggest number-betting operator, rose 4.8 percent to 5.20 ringgit after fourth-quarter net income jumped 67 percent and the company announced a special dividend.
Toyota Motor Corp., the world’s No. 1 automaker, fell 2.6 percent in Tokyo. Sony Corp., which gets 24 percent of its sales from the U.S., retreated 2.7 percent. PetroChina Co., China’s biggest oil producer, fell 4.7 percent in Hong Kong and Rio Tinto Group, the world’s third-largest mining company, slumped 4.2 percent in Sydney as oil and copper prices fell. Declines in Asia extended a global slump that dragged the MSCI World Index down by the most in two months yesterday.
“Some may have believed that the deterioration of the global economy had ended, but that’s not the case,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $52 billion in Tokyo. “Those who bought stocks on a perception the economy would improve are now selling on reality.”
The MSCI Asia Pacific Index sank 2.2 percent to 101.30 as of 12:57 p.m. in Tokyo, the biggest drop since May 14. The gauge has surged 44 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
Japan’s Nikkei 225 Stock Average fell 2.6 percent to 9,781.30 as the central bank left the overnight lending rate unchanged at 0.1 percent today. Hong Kong’s Hang Seng Index slumped 3.2 percent.
The Kospi Index dropped 1.1 percent in Seoul as MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, left South Korea unchanged as an emerging market. The country, the Asia Pacific’s sixth-largest stock market, had been under review for an upgrade to developed status.
Manufacturing Contraction
Konica Minolta Holdings Inc., which makes printers, slumped 6.2 percent in Tokyo after Credit Suisse Group AG downgraded the stock. Australia’s Nufarm Ltd., which supplies farm chemicals, sank 12 percent after cutting its profit target. Among stocks that rose today, Macquarie Communications Infrastructure Group surged 26 percent after receiving an increased takeover bid.
Futures on the Standard & Poor’s 500 Index dropped 0.1 percent. The gauge slid 2.4 percent yesterday, the most since May 13, as the Federal Reserve Bank of New York’s general economic index fell to minus 9.4 in June from minus 4.6 the previous month. Economists in a Bloomberg survey had expected the gauge to stay unchanged. Readings below zero for the index signal manufacturing is shrinking.
‘Moderate’ Recovery
The New York data was the latest in a string of figures that have made some investors more cautious on economic growth prospects. Japan’s government reported on June 8 that the country’s current-account surplus narrowed in April as exports slumped. Overseas shipments declined 26.4 percent last month from a year earlier, China’s customs bureau said on June 11.
“Investors expected the global economy will recover at a fairly fast pace, but this view is changing to one that a recovery will remain moderate,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Toyota, which gets 31 percent of its revenue from North America, sank 2.6 percent to 3,730 yen. Sony, the maker of the PlayStation 3, lost 2.7 percent to 2,560 yen.
Japanese exporters also fell as the yen’s gains against all 16 of the most-traded currencies threatened the value of overseas sales. The currency advanced 0.9 percent to 133.83 per euro after climbing to 133.24, the highest level since May 28. It rose to 96.96 per dollar from 97.84.
Safe Havens
Treasuries and the yen rose as the decline in stocks increased demand for safer assets. Treasuries gained for a fourth day, the longest winning streak in five months. The yield on the benchmark 10-year note fell two basis points to 3.69 percent according to BGCantor Market data.
PetroChina slumped 4.7 percent to HK$8.57 as crude oil fell today for the third-straight day in New York. Cnooc Ltd., China’s largest offshore oil producer, dropped 5.3 percent to HK$9.93.
Rio Tinto slumped 4.2 percent to A$72.33 after copper futures dropped 3.6 percent in New York yesterday, the most in almost two weeks. BHP Billiton Ltd., the world’s biggest mining company, fell 1.8 percent to A$36.33.
Materials and energy stocks are the best performing of the MSCI Asia Pacific Index’s 10 industries in the past month as investors bet demand for raw materials will pick up as the global economy recovers. The International Monetary Fund raised its growth forecast for the U.S. economy yesterday.
Rising Valuations
“The green shoots of an economic turnaround continue to appear, but the question is whether markets have priced in a bumper harvest,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “People are now turning their attention to the appropriateness of stock prices.”
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. The rally since March has driven the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since Sept. 26, according to Bloomberg data.
Konica Minolta fell 6.2 percent to 980 yen, paring its climb in the past six months to 43 percent. Credit Suisse Group lowered its recommendation to “underperform” from “neutral” saying the shares may have “overheated.”
Nufarm tumbled 12 percent to A$10.68 after it cut its earnings forecast on lower-than-expected weed killer sales.
Macquarie Communications, which invests in television and radio-transmission towers, surged 26 percent to A$2.93. Canada Pension Plan Investment Board raised its offer for the company by 20 percent after shareholders threatened to block the purchase.
Berjaya Sports Toto Bhd., Malaysia’s biggest number-betting operator, rose 4.8 percent to 5.20 ringgit after fourth-quarter net income jumped 67 percent and the company announced a special dividend.
India’s ‘Not for Sale’ Legal Market Draws U.S., U.K. Law Firms
June 16 (Bloomberg) -- Two weeks before Clifford Chance LLP said it would fire as many as 100 lawyers in London and New York, the world’s largest law firm by revenue announced an alliance with India’s AZB & Partners to expand operations there.
The firms said in January that they were establishing a referral relationship that would give Clifford Chance a way to serve clients doing business in India, which bans foreign firms from practicing in the country. This month London-based Clyde & Co. and ALMT Legal announced a similar association, saying they would look to merge once it was “permissible.”
These alliances and the increased hiring of Indian lawyers come as U.K. and U.S. law firms are fighting a collapse in work from their financial clients. India is a logical countertrend. For the past five years, Asia’s third-largest economy grew at the fastest pace since independence in 1947. Lawyers are betting India will be a growth market for them once they’re allowed in.
“Most international law firms are looking at doing more” in India, said Sunil Gadhia, chief executive officer of London- based Stephenson Harwood LLP. It’s “a market where firms can generate more business” than in Western economies, he said.
“India’s a place you have to be, from a global business franchise standpoint,” Goldman Sachs Group Inc. India head Brooks Entwistle told 66 European and North American law firms attending a Mumbai conference of the International Bar Association in March. Some of the firms, barred from practicing in India since a 1995 court order, have set up India teams in nearby locations, including Singapore, to serve companies doing Indian deals.
‘Bullish’
“Indian corporates are very bullish,” said Sandeep Katwala, India group head of London’s Linklaters LLP, which allied with Mumbai-based Talwar Thakore & Associates in 2007. Since the election “we’ve seen more mandates in the capital markets than for the last six to eight months,” he said.
Private equity firms’ interest in pre-IPO investments also has revived from “virtually nothing for a few months,” due to positive sentiment following the government’s re-election last month and a belief in the economy’s underlying strength, he said.
“The outlook for India is very promising -- more than any other Jones Day market, in my view,” said Jeffrey Maddox, a Hong Kong-based partner of the Washington-based firm, which works with New Delhi-based P&A Law Offices, which a Jones Day partner set up in 1995.
In February, Jones Day hired Sushma Jobanputra, a Barclays Capital managing director who was previously a lawyer with Linklaters, to join its India practice based in Singapore, Maddox said.
‘Same Basic Problem’
“Most international firms have the same basic problem as us: We service our clients globally, and India is a big market,” said Chris Wyman, the India practice head of London- based Clifford Chance. “If you’re trying to have a global footprint, then ignoring India is nonsense.”
In November, Clifford Chance hired Rahul Guptan from Amarchand & Mangaldas & Suresh A. Shroff & Co., the top Indian legal adviser on acquisitions. He works in its India capital markets group based in Singapore.
The London firm and AZB, which has offices in Mumbai, Delhi and Bangalore, “would want to have a presence working alongside one another as soon as we could,” said Wyman, who plans to spend a few months in AZB’s Mumbai office.
“It’s difficult to operate in a market where you don’t have a base,” said Andrew Harrow, managing partner of the India group at Allen & Overy LLP, which entered a referral, training and joint marketing relationship in 2008 with India’s Trilegal.
Swamped
The 15 or so Indian firms worth partnering with have been swamped with offers from global firms seeking an advantage over competitors, according to Reena Sengupta, whose RSG Consulting has published a study of the Indian legal market.
“Liberalization of the legal sector isn’t going to be top of the government’s agenda, but with its strong mandate, we may see it in two years rather than five,” she said.
India’s central bank licensed New York-based White & Case LLP to set up a liaison office in Mumbai in 1994, when the government at the time was first opening the economy to foreign investment. Chadbourne & Parke LLP of New York and Ashurst LLP of London were also licensed.
Indian lawyers opposed these operations, winning an interim ruling in the Mumbai High Court in 1995 that local lawyers have a monopoly on practicing law in the country. Government proposals to allow foreign lawyers in have also been opposed.
White & Case pulled out voluntarily after the ruling, as did Chadbourne, though Ashurst remains in New Delhi. No new licenses are being issued.
Illegal Practice
Indian lawyers argued that foreign lawyers with offices in India were illegally practicing even when they advised clients on non-Indian law, such as matters related to global transactions. In 2007, the law ministry filed an affidavit disagreeing with this point. A court decision is pending.
“We can’t help those countries where legal services are facing negative growth by letting their firms come to India,” Lalit Bhasin told the March IBA conference. “India’s legal sector is not for sale,” the Society of Indian Law Firms president said.
While other Indian lawyers, such as Cyril Shroff, believe deregulation of the Indian legal market is “at some stage inevitable,” the Amarchand Managing Partner said in an interview that his firm plans to stay independent.
“We will have the critical mass, both in terms of depth and breadth, to deal with the challenges,” he said. Suhail Nathani, one of the founders of Economic Laws Practice in Mumbai, said the eight-year-old firm is currently focused on organic growth rather than a foreign alliance.
Continued Opposition
Indian lawyers told Law Minister Veerappa Moily in a June 8 meeting that they continued to oppose opening the legal market to foreign law firms.
Katwala of Linklaters rejected the notion that global firms like his see India just as an alternative to slowing home markets. Even with rapid growth, India’s legal market won’t exceed that of the U.S. or U.K. in the next 10 years, he said.
“That’s not what’s driving us,” he said. “If deregulation doesn’t happen for, say, five years, I don’t think we’d scale down our focus, simply because our clients want us to be involved.” The decision to invest in India was taken “a long time ago,” he said.
Not every law firm focused on India feels an alliance is essential. An exclusive relationship isn’t “at present” the best strategy for Freshfields Bruckhaus Deringer LLP, said Pratap Amin, head of the firm’s India practice.
Freshfields
The London-based firm, advising Africa’s largest mobile- phone company, MTN Group Ltd., on a merger with India’s Bharti Airtel Ltd., has about 25 lawyers in its India practice, mainly in London, he said. It works with three or four Indian firms.
White & Case, which terminated an alliance with Mumbai- based India Law Services in 2005 and closed its liaison office in 2008, is still “fully prepared” to take advantage of liberalization, according to Nandan Nelivigi, a New York-based partner in the firm’s India practice.
“India is a ‘must have’ when the rules for entry of foreign law firms are clear,” he said. “Everything will be up for grabs at that time, and I don’t believe any of the participants in tie-ups have really agreed upon all the big issues which would need to be addressed and can only be addressed when the rules are clear.”
“The Indian legal market is important, not so much for today, but for the future,” said David Jacobs, the head of Chicago-based Baker & McKenzie LLP’s India practice. Foreign acquisitions by Indian companies more than tripled to $13.9 billion in 2008 from $4.5 billion in 2005, and India “will be restored as one of the dominant global economies in our lifetimes,” he said.
Security Risks
The risks to that scenario are the global financial crisis and security issues, said Jacobs, who spent 46 hours in his 16th-floor Mumbai hotel room in November while it was besieged by terrorists. Jacobs said a second such attack could discourage foreign investment in India.
Ashurst, the one international firm that maintains an Indian office, doesn’t practice law there currently. It will continue to work with three or four Indian firms when it’s allowed to set up a legal office, according to India practice head Richard Gubbins. The office, staffed by a former civil servant, provides advice on how the government works, he said.
“I suspect foreign firms, even once they have been allowed to set up in India, won’t be allowed to practice Indian law for some considerable time,” Gubbins said.
The firms said in January that they were establishing a referral relationship that would give Clifford Chance a way to serve clients doing business in India, which bans foreign firms from practicing in the country. This month London-based Clyde & Co. and ALMT Legal announced a similar association, saying they would look to merge once it was “permissible.”
These alliances and the increased hiring of Indian lawyers come as U.K. and U.S. law firms are fighting a collapse in work from their financial clients. India is a logical countertrend. For the past five years, Asia’s third-largest economy grew at the fastest pace since independence in 1947. Lawyers are betting India will be a growth market for them once they’re allowed in.
“Most international law firms are looking at doing more” in India, said Sunil Gadhia, chief executive officer of London- based Stephenson Harwood LLP. It’s “a market where firms can generate more business” than in Western economies, he said.
“India’s a place you have to be, from a global business franchise standpoint,” Goldman Sachs Group Inc. India head Brooks Entwistle told 66 European and North American law firms attending a Mumbai conference of the International Bar Association in March. Some of the firms, barred from practicing in India since a 1995 court order, have set up India teams in nearby locations, including Singapore, to serve companies doing Indian deals.
‘Bullish’
“Indian corporates are very bullish,” said Sandeep Katwala, India group head of London’s Linklaters LLP, which allied with Mumbai-based Talwar Thakore & Associates in 2007. Since the election “we’ve seen more mandates in the capital markets than for the last six to eight months,” he said.
Private equity firms’ interest in pre-IPO investments also has revived from “virtually nothing for a few months,” due to positive sentiment following the government’s re-election last month and a belief in the economy’s underlying strength, he said.
“The outlook for India is very promising -- more than any other Jones Day market, in my view,” said Jeffrey Maddox, a Hong Kong-based partner of the Washington-based firm, which works with New Delhi-based P&A Law Offices, which a Jones Day partner set up in 1995.
In February, Jones Day hired Sushma Jobanputra, a Barclays Capital managing director who was previously a lawyer with Linklaters, to join its India practice based in Singapore, Maddox said.
‘Same Basic Problem’
“Most international firms have the same basic problem as us: We service our clients globally, and India is a big market,” said Chris Wyman, the India practice head of London- based Clifford Chance. “If you’re trying to have a global footprint, then ignoring India is nonsense.”
In November, Clifford Chance hired Rahul Guptan from Amarchand & Mangaldas & Suresh A. Shroff & Co., the top Indian legal adviser on acquisitions. He works in its India capital markets group based in Singapore.
The London firm and AZB, which has offices in Mumbai, Delhi and Bangalore, “would want to have a presence working alongside one another as soon as we could,” said Wyman, who plans to spend a few months in AZB’s Mumbai office.
“It’s difficult to operate in a market where you don’t have a base,” said Andrew Harrow, managing partner of the India group at Allen & Overy LLP, which entered a referral, training and joint marketing relationship in 2008 with India’s Trilegal.
Swamped
The 15 or so Indian firms worth partnering with have been swamped with offers from global firms seeking an advantage over competitors, according to Reena Sengupta, whose RSG Consulting has published a study of the Indian legal market.
“Liberalization of the legal sector isn’t going to be top of the government’s agenda, but with its strong mandate, we may see it in two years rather than five,” she said.
India’s central bank licensed New York-based White & Case LLP to set up a liaison office in Mumbai in 1994, when the government at the time was first opening the economy to foreign investment. Chadbourne & Parke LLP of New York and Ashurst LLP of London were also licensed.
Indian lawyers opposed these operations, winning an interim ruling in the Mumbai High Court in 1995 that local lawyers have a monopoly on practicing law in the country. Government proposals to allow foreign lawyers in have also been opposed.
White & Case pulled out voluntarily after the ruling, as did Chadbourne, though Ashurst remains in New Delhi. No new licenses are being issued.
Illegal Practice
Indian lawyers argued that foreign lawyers with offices in India were illegally practicing even when they advised clients on non-Indian law, such as matters related to global transactions. In 2007, the law ministry filed an affidavit disagreeing with this point. A court decision is pending.
“We can’t help those countries where legal services are facing negative growth by letting their firms come to India,” Lalit Bhasin told the March IBA conference. “India’s legal sector is not for sale,” the Society of Indian Law Firms president said.
While other Indian lawyers, such as Cyril Shroff, believe deregulation of the Indian legal market is “at some stage inevitable,” the Amarchand Managing Partner said in an interview that his firm plans to stay independent.
“We will have the critical mass, both in terms of depth and breadth, to deal with the challenges,” he said. Suhail Nathani, one of the founders of Economic Laws Practice in Mumbai, said the eight-year-old firm is currently focused on organic growth rather than a foreign alliance.
Continued Opposition
Indian lawyers told Law Minister Veerappa Moily in a June 8 meeting that they continued to oppose opening the legal market to foreign law firms.
Katwala of Linklaters rejected the notion that global firms like his see India just as an alternative to slowing home markets. Even with rapid growth, India’s legal market won’t exceed that of the U.S. or U.K. in the next 10 years, he said.
“That’s not what’s driving us,” he said. “If deregulation doesn’t happen for, say, five years, I don’t think we’d scale down our focus, simply because our clients want us to be involved.” The decision to invest in India was taken “a long time ago,” he said.
Not every law firm focused on India feels an alliance is essential. An exclusive relationship isn’t “at present” the best strategy for Freshfields Bruckhaus Deringer LLP, said Pratap Amin, head of the firm’s India practice.
Freshfields
The London-based firm, advising Africa’s largest mobile- phone company, MTN Group Ltd., on a merger with India’s Bharti Airtel Ltd., has about 25 lawyers in its India practice, mainly in London, he said. It works with three or four Indian firms.
White & Case, which terminated an alliance with Mumbai- based India Law Services in 2005 and closed its liaison office in 2008, is still “fully prepared” to take advantage of liberalization, according to Nandan Nelivigi, a New York-based partner in the firm’s India practice.
“India is a ‘must have’ when the rules for entry of foreign law firms are clear,” he said. “Everything will be up for grabs at that time, and I don’t believe any of the participants in tie-ups have really agreed upon all the big issues which would need to be addressed and can only be addressed when the rules are clear.”
“The Indian legal market is important, not so much for today, but for the future,” said David Jacobs, the head of Chicago-based Baker & McKenzie LLP’s India practice. Foreign acquisitions by Indian companies more than tripled to $13.9 billion in 2008 from $4.5 billion in 2005, and India “will be restored as one of the dominant global economies in our lifetimes,” he said.
Security Risks
The risks to that scenario are the global financial crisis and security issues, said Jacobs, who spent 46 hours in his 16th-floor Mumbai hotel room in November while it was besieged by terrorists. Jacobs said a second such attack could discourage foreign investment in India.
Ashurst, the one international firm that maintains an Indian office, doesn’t practice law there currently. It will continue to work with three or four Indian firms when it’s allowed to set up a legal office, according to India practice head Richard Gubbins. The office, staffed by a former civil servant, provides advice on how the government works, he said.
“I suspect foreign firms, even once they have been allowed to set up in India, won’t be allowed to practice Indian law for some considerable time,” Gubbins said.
European, Asian Stocks Decline; U.S. Index Futures Retreat
June 15 (Bloomberg) -- European and Asian stocks fell on speculation share prices have outstripped the prospects for earnings with the MSCI World Index trading at the highest level relative to profits in four years. U.S. futures slid.
BHP Billiton Ltd., the world’s biggest mining company, and Royal Dutch Shell Plc, Europe’s largest oil producer, retreated more than 2.8 percent as copper, lead and crude decreased. TomTom NV, Europe’s largest maker of car-navigation devices, slid 7.6 percent after saying it plans to raise 430 million euros ($596 million) selling shares.
The MSCI World fell for a second day, losing 1 percent at 10:33 a.m. in London. The gauge of 23 developed markets has surged 43 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression.
The rally has left the index trading at 18.2 times earnings, the most expensive level since 2004, weekly data compiled by Bloomberg show.
“Equity valuations have gone from exceptionally cheap to neutral territory,” said Bob Parker, who helps oversee about $600 billion as vice chairman of Credit Suisse Asset Management in London. “For the rest of June, we’ll probably trade sideways or give up some of the gains. There is a serious concern, justifiably so, of a number of constraints on growth recovery going into 2010.”
Budget Deficits
Group of Eight finance ministers began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.
Officials meeting in Lecce, Italy, over the weekend said it’s prudent to consider what exit strategies to deploy once global growth is secured and asked the International Monetary Fund to examine how to do so without reigniting the two-year crisis. At the same time, they said it’s premature to rein back more than $2 trillion in stimulus packages.
European payrolls contracted by the most on record in the first quarter as the recession forced companies to eliminate jobs. Employment in the 16-member euro region dropped 0.8 percent from the fourth quarter, when it fell 0.4 percent, the European Union statistics office in Luxembourg said today.
Europe’s Dow Jones Stoxx 600 Index slipped 1.7 percent today as all 19 industry groups declined. The MSCI Asia Pacific Index lost 1.5 percent, retreating from the highest level since October. Futures on the Standard & Poor’s 500 Index fell 1.3 percent.
Copper Slides
BHP slid 2.8 percent to 1,444 pence, while Rio Tinto Group, the world’s third-largest mining company, decreased 5.3 percent to 2,950 pence.
Copper declined in London on speculation supply may outpace demand in China, the world’s largest consumer, as the country’s imports climbed to record levels for the fourth month and domestic stockpiles jumped to the highest in nearly 15 months.
Shell sank 3.2 percent to 1,596 pence, the biggest intraday retreat in more than five weeks. Crude oil for July delivery dropped as much as 1.9 percent to $70.71 a barrel on the New York Mercantile Exchange.
Aker Solutions ASA gained 1.5 percent to 56 kroner after Goldman Sachs Group Inc. upgraded shares of Norway’s largest engineering company to “buy” from “neutral,” and added them to its “conviction buy” list.
The brokerage boosted its recommendation on oil-service companies to “attractive” from “neutral,” saying the industry has “underperformed integrated oils” and the exploration and production sector since mid-2007.
TomTom, Holcim
TomTom slid 7.6 percent to 6.91 euros. The company plans to raise funds in a fully committed rights offering and through a private placement. The manufacturer said its lenders also agreed to change the terms of its financial covenants to provide “greater headroom.”
TomTom has 1.16 billion euros of net debt after it bought navigation firm Tele Atlas for 2.9 billion euros to gain access to the market for digital maps and to expand services.
Holcim Ltd. slipped 1.1 percent to 61.3 Swiss francs. The world’s second-biggest cement maker agreed to buy Australian operations from Cemex SAB de CV for A$2.02 billion ($1.61 billion) to enter the markets for concrete and crushed rock.
The Swiss company aims to raise about 2 billion francs ($1.84 billion) by selling as many as 55.4 million shares in a rights offer to pay for the purchase, it said today. The price is equal to 6.6 times Cemex Australia’s earnings.
BHP Billiton Ltd., the world’s biggest mining company, and Royal Dutch Shell Plc, Europe’s largest oil producer, retreated more than 2.8 percent as copper, lead and crude decreased. TomTom NV, Europe’s largest maker of car-navigation devices, slid 7.6 percent after saying it plans to raise 430 million euros ($596 million) selling shares.
The MSCI World fell for a second day, losing 1 percent at 10:33 a.m. in London. The gauge of 23 developed markets has surged 43 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression.
The rally has left the index trading at 18.2 times earnings, the most expensive level since 2004, weekly data compiled by Bloomberg show.
“Equity valuations have gone from exceptionally cheap to neutral territory,” said Bob Parker, who helps oversee about $600 billion as vice chairman of Credit Suisse Asset Management in London. “For the rest of June, we’ll probably trade sideways or give up some of the gains. There is a serious concern, justifiably so, of a number of constraints on growth recovery going into 2010.”
Budget Deficits
Group of Eight finance ministers began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.
Officials meeting in Lecce, Italy, over the weekend said it’s prudent to consider what exit strategies to deploy once global growth is secured and asked the International Monetary Fund to examine how to do so without reigniting the two-year crisis. At the same time, they said it’s premature to rein back more than $2 trillion in stimulus packages.
European payrolls contracted by the most on record in the first quarter as the recession forced companies to eliminate jobs. Employment in the 16-member euro region dropped 0.8 percent from the fourth quarter, when it fell 0.4 percent, the European Union statistics office in Luxembourg said today.
Europe’s Dow Jones Stoxx 600 Index slipped 1.7 percent today as all 19 industry groups declined. The MSCI Asia Pacific Index lost 1.5 percent, retreating from the highest level since October. Futures on the Standard & Poor’s 500 Index fell 1.3 percent.
Copper Slides
BHP slid 2.8 percent to 1,444 pence, while Rio Tinto Group, the world’s third-largest mining company, decreased 5.3 percent to 2,950 pence.
Copper declined in London on speculation supply may outpace demand in China, the world’s largest consumer, as the country’s imports climbed to record levels for the fourth month and domestic stockpiles jumped to the highest in nearly 15 months.
Shell sank 3.2 percent to 1,596 pence, the biggest intraday retreat in more than five weeks. Crude oil for July delivery dropped as much as 1.9 percent to $70.71 a barrel on the New York Mercantile Exchange.
Aker Solutions ASA gained 1.5 percent to 56 kroner after Goldman Sachs Group Inc. upgraded shares of Norway’s largest engineering company to “buy” from “neutral,” and added them to its “conviction buy” list.
The brokerage boosted its recommendation on oil-service companies to “attractive” from “neutral,” saying the industry has “underperformed integrated oils” and the exploration and production sector since mid-2007.
TomTom, Holcim
TomTom slid 7.6 percent to 6.91 euros. The company plans to raise funds in a fully committed rights offering and through a private placement. The manufacturer said its lenders also agreed to change the terms of its financial covenants to provide “greater headroom.”
TomTom has 1.16 billion euros of net debt after it bought navigation firm Tele Atlas for 2.9 billion euros to gain access to the market for digital maps and to expand services.
Holcim Ltd. slipped 1.1 percent to 61.3 Swiss francs. The world’s second-biggest cement maker agreed to buy Australian operations from Cemex SAB de CV for A$2.02 billion ($1.61 billion) to enter the markets for concrete and crushed rock.
The Swiss company aims to raise about 2 billion francs ($1.84 billion) by selling as many as 55.4 million shares in a rights offer to pay for the purchase, it said today. The price is equal to 6.6 times Cemex Australia’s earnings.
Sunday, June 14, 2009
Recession places groups in mood to expand
15th June - 2009
Nearly three-quarters of owner-managed businesses plan to make an acquisition or establish a joint venture within the next three years as they take advantage of opportunities for expansion created by the downturn.
A further 21 per cent plan to expand abroad, according to a survey by Baker Tilly, the professional services firm, of more than 300 directors of companies with turnover ranging from £5m to £50m-plus.
But more than half of the respondents predicted more redundancies and expected a further drop in sales in the coming year. The snapshot was taken in December and February, before the signs of economic recovery started to appear.
Thirty-eight per cent said they expected to make an acquisition over the next three years and 35 per cent said they expected to establish a joint venture with a former competitor.
"It's a once in a generation opportunity for businesses to grow through acquisition. If you are in the fortunate enough position of having cash or access to finance there are some fantastic bargains out there," said Rob Donaldson, Baker Tilly's head of mergers and acquisitions. "You have to be careful as some of the businesses are very cheap for good reason, but there are some great deals."
But 40 per cent of respondents said they planned to exit from their businesses within the next decade, with more than 20 per cent expecting to do so within five years.
Mr Donaldson said "although nobody in their right mind would try to sell a business today unless they have to, it is a good time to be getting ready".
Just over a half predicted a drop in staff headcount in the coming year, while 55 per cent expected a fall in operating profits.
Larger businesses were the most optimistic, with the smallest ones being the next bullish. The mid-tier of respondents were the most pessimistic, with more than half expecting sales to fall.
Baker Tilly said that was because large companies were often better capitalised and in a stronger position to cope with a slowdown, while small companies could be more nimble and quicker at adapting to changing circumstances. Those in the middle needed to consider where they could improve efficiency.
"Funding flexibility in these situations is important. While obtaining finance is clearly difficult, there is funding available provided you understand where to look," Mr Donaldson said.
"Between various government initiatives, the slowly healing banks, and the mountain of private equity funding sitting on the sidelines, money can be found."
Nearly three-quarters of owner-managed businesses plan to make an acquisition or establish a joint venture within the next three years as they take advantage of opportunities for expansion created by the downturn.
A further 21 per cent plan to expand abroad, according to a survey by Baker Tilly, the professional services firm, of more than 300 directors of companies with turnover ranging from £5m to £50m-plus.
But more than half of the respondents predicted more redundancies and expected a further drop in sales in the coming year. The snapshot was taken in December and February, before the signs of economic recovery started to appear.
Thirty-eight per cent said they expected to make an acquisition over the next three years and 35 per cent said they expected to establish a joint venture with a former competitor.
"It's a once in a generation opportunity for businesses to grow through acquisition. If you are in the fortunate enough position of having cash or access to finance there are some fantastic bargains out there," said Rob Donaldson, Baker Tilly's head of mergers and acquisitions. "You have to be careful as some of the businesses are very cheap for good reason, but there are some great deals."
But 40 per cent of respondents said they planned to exit from their businesses within the next decade, with more than 20 per cent expecting to do so within five years.
Mr Donaldson said "although nobody in their right mind would try to sell a business today unless they have to, it is a good time to be getting ready".
Just over a half predicted a drop in staff headcount in the coming year, while 55 per cent expected a fall in operating profits.
Larger businesses were the most optimistic, with the smallest ones being the next bullish. The mid-tier of respondents were the most pessimistic, with more than half expecting sales to fall.
Baker Tilly said that was because large companies were often better capitalised and in a stronger position to cope with a slowdown, while small companies could be more nimble and quicker at adapting to changing circumstances. Those in the middle needed to consider where they could improve efficiency.
"Funding flexibility in these situations is important. While obtaining finance is clearly difficult, there is funding available provided you understand where to look," Mr Donaldson said.
"Between various government initiatives, the slowly healing banks, and the mountain of private equity funding sitting on the sidelines, money can be found."
Asian Stocks Fall on Valuation Concerns; BHP, OZ Minerals Drop
June 15 (Bloomberg) -- Asian stocks declined, dragging the MSCI Asia Pacific Index from an eight-month high, on concern a rally since March had overvalued earnings prospects.
BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, sank 1.9 percent in Sydney after oil and metal prices slipped. OZ Minerals Ltd., an Australian mining company, fell 3.4 percent as Citigroup Inc. downgraded the stock. Malaysian Airline System Bhd., the country’s national carrier, slumped 3.1 percent after posting a quarterly loss.
The MSCI Asia Pacific Index lost 0.7 percent to 104.45 as of 12:29 p.m. in Tokyo, after ending last week at its highest level since Oct. 2. Japan’s Nikkei 225 Stock Average fell 0.7 percent to 10,068.03, while South Korea’s Kospi lost 1.2 percent.
“We’re still in the midst of the worst global recession in the post-war period,” said Shane Oliver, a strategist at AMP Capital Investors in Sydney. “It’s inevitable that aftershocks will keep coming through.”
Singapore’s Straits Times Index sank 1.2 percent after the government reported the city’s employers had fired more workers last quarter than initially estimated. China’s Shanghai Composite added 0.2 percent as Premier Wen Jiabao reiterated the need for “proactive” fiscal policies.
Shenzhen Development Bank Co. jumped 8.2 percent after Ping An Insurance (Group) Co. said it plans to buy a stake. Goodman Group, Australia’s biggest industrial real estate investment trust, rose 5.6 percent after the Australian Financial Review reported China Investment Corp. will take a stake in the company. Aeon Co., Japan’s second-largest retailer, climbed 4.1 percent on an upgrade at Bank of America Corp.’s Merrill Lynch & Co.
‘Signs of Stabilization’
MSCI’s Asian gauge has gained 48 percent from a more than five-year low on March 9 amid speculation the global economy is recovering. The Group of Eight finance ministers said after a meeting in Italy at the weekend that they have started pondering how to reverse the emergency steps they took to rescue the global economy as there are “signs of stabilization.”
BHP lost 1.9 percent to A$37.32. Rio Tinto Group, the world’s third-biggest mining company, lost 0.9 percent to A$76.51. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, sank 1.2 percent to A$42.36.
Gold futures dropped 2.2 percent in New York on June 12, while copper slid 2.9 percent. Oil fell 0.5 percent in after- hours trading, adding to the previous trading day’s 0.9 percent decline.
OZ Minerals declined 3.4 percent to A$1.01 as Citigroup Inc. cut the company’s stock rating to “sell” from “hold.”
Brokerage Downgrades
Malaysian Airline dipped 3.1 percent to 3.16 ringgit after reporting its first quarterly loss in more than two years on lower passenger traffic and wrong-way bets on the price of fuel. The stock was downgraded to “underperform” from “neutral,” Credit Suisse Group AG said in a report today.
Shenzhen Development Bank gained 8.2 percent to 21.63 yuan after Ping An agreed to pay $3.2 billion for a controlling stake. Ping An, China’s second-largest insurer, gained 1.2 percent to 45.64 yuan following a five-day trading halt.
Goodman Group rose 5.6 percent to 47.5 Australian cents. The company may announce China Investment Corp. will take a A$500 million ($404 million) stake, the Australian Financial Review reported, without saying where the information came from.
Aeon climbed 4.1 percent to 1,037 yen after Merrill upgraded the stock to “neutral” from “underperform” amid optimism store earnings will increase.
BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, sank 1.9 percent in Sydney after oil and metal prices slipped. OZ Minerals Ltd., an Australian mining company, fell 3.4 percent as Citigroup Inc. downgraded the stock. Malaysian Airline System Bhd., the country’s national carrier, slumped 3.1 percent after posting a quarterly loss.
The MSCI Asia Pacific Index lost 0.7 percent to 104.45 as of 12:29 p.m. in Tokyo, after ending last week at its highest level since Oct. 2. Japan’s Nikkei 225 Stock Average fell 0.7 percent to 10,068.03, while South Korea’s Kospi lost 1.2 percent.
“We’re still in the midst of the worst global recession in the post-war period,” said Shane Oliver, a strategist at AMP Capital Investors in Sydney. “It’s inevitable that aftershocks will keep coming through.”
Singapore’s Straits Times Index sank 1.2 percent after the government reported the city’s employers had fired more workers last quarter than initially estimated. China’s Shanghai Composite added 0.2 percent as Premier Wen Jiabao reiterated the need for “proactive” fiscal policies.
Shenzhen Development Bank Co. jumped 8.2 percent after Ping An Insurance (Group) Co. said it plans to buy a stake. Goodman Group, Australia’s biggest industrial real estate investment trust, rose 5.6 percent after the Australian Financial Review reported China Investment Corp. will take a stake in the company. Aeon Co., Japan’s second-largest retailer, climbed 4.1 percent on an upgrade at Bank of America Corp.’s Merrill Lynch & Co.
‘Signs of Stabilization’
MSCI’s Asian gauge has gained 48 percent from a more than five-year low on March 9 amid speculation the global economy is recovering. The Group of Eight finance ministers said after a meeting in Italy at the weekend that they have started pondering how to reverse the emergency steps they took to rescue the global economy as there are “signs of stabilization.”
BHP lost 1.9 percent to A$37.32. Rio Tinto Group, the world’s third-biggest mining company, lost 0.9 percent to A$76.51. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, sank 1.2 percent to A$42.36.
Gold futures dropped 2.2 percent in New York on June 12, while copper slid 2.9 percent. Oil fell 0.5 percent in after- hours trading, adding to the previous trading day’s 0.9 percent decline.
OZ Minerals declined 3.4 percent to A$1.01 as Citigroup Inc. cut the company’s stock rating to “sell” from “hold.”
Brokerage Downgrades
Malaysian Airline dipped 3.1 percent to 3.16 ringgit after reporting its first quarterly loss in more than two years on lower passenger traffic and wrong-way bets on the price of fuel. The stock was downgraded to “underperform” from “neutral,” Credit Suisse Group AG said in a report today.
Shenzhen Development Bank gained 8.2 percent to 21.63 yuan after Ping An agreed to pay $3.2 billion for a controlling stake. Ping An, China’s second-largest insurer, gained 1.2 percent to 45.64 yuan following a five-day trading halt.
Goodman Group rose 5.6 percent to 47.5 Australian cents. The company may announce China Investment Corp. will take a A$500 million ($404 million) stake, the Australian Financial Review reported, without saying where the information came from.
Aeon climbed 4.1 percent to 1,037 yen after Merrill upgraded the stock to “neutral” from “underperform” amid optimism store earnings will increase.
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