By Glen Carey
Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``The regional markets are following the U.S. and Asian markets higher,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``This is mainly backed by the recovery we are witnessing in global capital markets all over the world.''
Zain advanced 7.3 percent to 1,760 fils, its largest jump since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed. National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Sunday, September 21, 2008
Saudi Inflation Accelerates 10.9% in August on Rent
By Glen Carey
Sept. 21 (Bloomberg) -- Saudi Arabian inflation accelerated 10.9 percent in August as the cost of rent, water and fuel continued to hover near record levels, the Saudi Press Agency reported, citing the Central Department for Statistics.
Inflation in Saudi has soared since the middle of 2007 when it was at about 3 percent, and has surpassed 10 percent in each of the last three months, though it has eased since reaching a record of 11.1 percent in July.
Inflationary pressures in the kingdom will remain strong as government and private spending increases, exacerbated by the holy month of Ramadan in September, the Saudi Arabian Monetary Agency said in a quarterly inflation report published on its Web site on Sept. 6.
Inflation exceeded 10 percent in five of the six Gulf Cooperation Council states, including Qatar, as oil-fueled economic growth created shortages of housing and services. Crude oil closed last week at $104.55 a barrel on the New York Mercantile Exchange, down 29 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983.
The cost of rent, fuel and water for August in Saudi Arabia increased 18.5 percent, the Saudi Press Agency reported, citing the Central Department for Statistics. The GCC is an economic and political block of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain, which together pump almost 20 percent of the world's oil.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Sept. 21 (Bloomberg) -- Saudi Arabian inflation accelerated 10.9 percent in August as the cost of rent, water and fuel continued to hover near record levels, the Saudi Press Agency reported, citing the Central Department for Statistics.
Inflation in Saudi has soared since the middle of 2007 when it was at about 3 percent, and has surpassed 10 percent in each of the last three months, though it has eased since reaching a record of 11.1 percent in July.
Inflationary pressures in the kingdom will remain strong as government and private spending increases, exacerbated by the holy month of Ramadan in September, the Saudi Arabian Monetary Agency said in a quarterly inflation report published on its Web site on Sept. 6.
Inflation exceeded 10 percent in five of the six Gulf Cooperation Council states, including Qatar, as oil-fueled economic growth created shortages of housing and services. Crude oil closed last week at $104.55 a barrel on the New York Mercantile Exchange, down 29 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983.
The cost of rent, fuel and water for August in Saudi Arabia increased 18.5 percent, the Saudi Press Agency reported, citing the Central Department for Statistics. The GCC is an economic and political block of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain, which together pump almost 20 percent of the world's oil.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Siemens Wins 553 Million-Riyal Contract From Emaar Saudi Unit
By Ayesha Daya
Sept. 21 (Bloomberg) -- Siemens AG, Europe's largest engineering company, won a 553 million-riyal ($147.5 million) contract from Emaar Economic City in Saudi Arabia for electrical works in the King Abdullah Economic City.
Siemens will develop the transmission and distribution network of as many as three sub-stations and related facilities for the first phase of King Abdullah Economic City, Emaar said today in e-mailed statement. Emaar Economic City is a unit of Dubai-based Emaar Properties PJSC, the largest publicly traded property developer in the Middle East.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
Read more...
Sept. 21 (Bloomberg) -- Siemens AG, Europe's largest engineering company, won a 553 million-riyal ($147.5 million) contract from Emaar Economic City in Saudi Arabia for electrical works in the King Abdullah Economic City.
Siemens will develop the transmission and distribution network of as many as three sub-stations and related facilities for the first phase of King Abdullah Economic City, Emaar said today in e-mailed statement. Emaar Economic City is a unit of Dubai-based Emaar Properties PJSC, the largest publicly traded property developer in the Middle East.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
Read more...
Emaar Jumps Most Since Listing on U.S. Bank Bailout
By Ayesha Daya
Sept. 21 (Bloomberg) -- Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, advanced the most since listing following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
Emaar soared to its 15 percent limit to close at 8.05 dirhams in Dubai, the biggest one-day gain since March 2000, data compiled by Bloomberg show. Emaar has still dropped 12 percent this month.
``U.A.E. markets are up due to the rebound in global markets following cash injection plans by the U.S. and other governments,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai. ``Real- estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month.''
Aldar Properties PJSC, Abu Dhabi's largest real-estate developer by market value, rose 9.6 percent to 7.77 dirhams, the largest increase since September 2005. The stock has still declined 20 percent in September.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause a price correction after mid-2009 and a cumulative decline of up to 20 percent by 2011, EFG- Hermes said.
``All reports on the real-estate sector expect Dubai to see a slowdown in its growth, but a correction of 10-20 percent is not a crash,'' said Abdel Khalek. ``I don't see a real estate crisis. They are bullish about Abu Dhabi.''
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
Read more...
Sept. 21 (Bloomberg) -- Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, advanced the most since listing following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
Emaar soared to its 15 percent limit to close at 8.05 dirhams in Dubai, the biggest one-day gain since March 2000, data compiled by Bloomberg show. Emaar has still dropped 12 percent this month.
``U.A.E. markets are up due to the rebound in global markets following cash injection plans by the U.S. and other governments,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai. ``Real- estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month.''
Aldar Properties PJSC, Abu Dhabi's largest real-estate developer by market value, rose 9.6 percent to 7.77 dirhams, the largest increase since September 2005. The stock has still declined 20 percent in September.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause a price correction after mid-2009 and a cumulative decline of up to 20 percent by 2011, EFG- Hermes said.
``All reports on the real-estate sector expect Dubai to see a slowdown in its growth, but a correction of 10-20 percent is not a crash,'' said Abdel Khalek. ``I don't see a real estate crisis. They are bullish about Abu Dhabi.''
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
Read more...
How're the FX Markets Different after the Financial Tsunami?
| Market Overview | Written by ActionForex.com | Sep 21 08 11:25 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weekly Review and Outlook
All financial markets around the world were rocked by the financial tsunami last week which started with Lehman Brother announcing bankruptcy and Merrill lynch selling to Bank of America. Panic in the markets reached a climax after AIG's bailout failed to restore confidence. Dow once had the sharpest fall since 2001 and dived to 11459 level. Yield on three-months US T-bills dropped to near 0% as investors flocked to the safest short-term assets. Dollar yen tumbled to as low as 103.54. Gold, on the other hand, soared to as high as 926 on safe haven buying. Crude oil dropped to near to $90 level. However, markets' sentiment had a drastic turn following coordinated actions from world's major central banks to almost quadruple the fund injected to the financial markets from $67b to $247b. Risk appetite came back with the sharpest two days rally in stocks since 1987 following US government's bank $700b bank rescue bank and rule to limit short selling in financial stocks. Yen crosses were sharply higher as carry trades returned and the greenback was generally lower across the board. Crude oil, on the other hand, bounced back to above 100 on hope of improved economic outlook. So, after all the events, how's the forex markets different from a week ago? Firstly, dollar index's high of 80.38 made on Sep 11 is confirmed to be a short term top. More pull back is now expected to be seen probably to 75.84 level. That is, the greenback should be generally weak in short term. Such weakness should be apparent against higher yield currencies and commodity currencies, in particular against Aussie, Kiwi, Sterling and also against Euro and probably Canadian dollar too. Secondly, rebound in yen crosses is expected to extend further after making a short term bottom last week. Further upside are expected to be seen, in particular in AUD/JPY, NZD/JPY and GBP/JPY. USD/JPY and USD/CHF will like remains mixed as weakness on both sides counter each other. Thirdly, Gold's strong rebound indicates that medium term correction from 1033 level should have already completed and more upside is expected in gold in short term. This is consistent with the short term dollar bearish view as well as the carry trade return view. But after all, there is no change in the medium term dollar and yen bullish view yet and markets are expected to resume prior dollar and yen up trend after the current corrections complete. Though, the key factors to pay attention will likely be the development in both the stock markets and oil. DOW's rebound, though strong, is still limited by 11867 key near term resistance. Meanwhile, crude oil is also limited below 111/122 resistance zone. Markets will likely resume to it's prior state once rebound in DOW and oil completes. But Dow's break of 11867 and oil's break of 122 will serve as important evidence that markets' sentiment has turned and will dampen the dollar and yen medium term bullish view.
Fed left the federal funds rates unchanged at 2.00%. The more important point to note is that this decision was done by the first unanimous vote in nearly a year. Fisher, who dissented by preferring a hike last time, also voted for no change. in the accompanying statement, Fed acknowledged that "strains in financial markets have increased significantly and labor markets have weakened further." Several factors, including tight credit conditions, ongoing housing contraction and slowing in export growth will "weigh on economic growth" over the "next few quarters". But the fed is still confident that the "substantial easing" and "measures to foster market liquidity" will promote moderate economic growth. Regarding inflation, Fed expects inflation to moderate later this year and next even though outlook remains highly "uncertain". US headline CPI unexpectedly dropped -0.1% mom in Aug. Yoy rate moderated more than expected from 5.6% to 5.4%. Though, core CPI climbed 0.2% mom with yoy rate up from 2.5% to 2.6%. TIC capital flow dropped sharply from 53.4b to 6.1b in Jul. Current account deficit widened to -183.1b in Q2. Jobless claims climbed to 455k. Empire state manufacturing index dropped sharply to -7.4 in Sep. Philly Fed survey surprised on the upside by turning positive to 3.8 in Sep. Industrial production dropped more than expected by -1.1% mom in Aug. Leading indicators dropped more than expected by -0.5% in Aug. NAHB housing markets index recovered more than expected to 18 in Sep. Building permits in US dropped much more than expected by -8.9% to 0.85m in Aug, housing starts dropped -6.2% to 0.89m. Eurozone Q2 labor costs rose 2.7%, below consensus of 2.5%. Final HICP is confirmed to be 3.8% yoy in Aug. Improvement in Germany and Eurozone ZEW economic sentiment were much stronger than expected from -55.5 to -41.1 and -55.7 to -4.09 in Sep respectively. Trade deficit widened to -2.3b in Jul. BoE minutes surprised the markets by revealing a two way split of votes, with ultradove Blanchflower voted for a 50bps cut and no one voted for a hike. In his letter to Chancellor Darling, BoE Governor King explained why the bank fails to bring down inflation and noted that "muted economic growth is necessary to dampen pressures on price and wages". He expects CPI to "peak soon at around 5%". Inflation data from UK showed CPI climbed more than expected to record high of 4.7% yoy in Aug. Though, RPI and RPI-X moderated from 5.00% to 4.8% and from 5.4% to 5.2% yoy respectively. In Aug, claimant count climbed further to 2.8%, jumped sharply to 32.5K versus expectation of 22.3k. Unemployment rate in Jul also rose to 5.5% versus consensus of 5.4%. CBI industrial trend survey came in much worse than expected at -26. Retail sales was surprisingly strong, rising 1.2% mom in Aug comparing to expectation of -0.5%. Yoy rate jumped to 3.3%. Swiss trade surplus narrowed less than expected to 1.43b. SNB left three-month Libor unchanged at 2.25-3.25%, mid point at 2.75% as widely expected. Swiss combined PPI moderated from 4.9% to 4.0% yoy in Aug. Swiss retail sales jumped 6.2%. ZEW improved from -79.6 to -44.4 in Sep. BoJ left rates unchanged at 0.5% as widely expected. In the accompanying statement, BoJ noted that energy prices and weak experts is keeping the economy sluggish but growth will return to a moderate path once commodity price stabilize and global economies improve. Inflation will remain high for months before moderating. Canadian leading indicators rose 0.3% in Aug. Wholesale sales rose 2.3% mom in Jul. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Week Ahead
Economic data will like remain in the back seat this week and intermarket relationship will continue to be dominant in driving movements in the FX markets. As mentioned above one of the key factors to look at is whether DOW will break 11867 level which will raise the odds that correction from last year's high of 14198 has made a medium term bottom. In such case, even stronger rebound will be seen in yen crosses which in turn will give dollar some more pressure. Gold already took the lead last week and confirming the completion of correction from1033 and further strength will also pressure the greenback too. Also, focus will be on whether crude oil will take out 111/122 key short term resistance zone. These developments will have important implications on whether dollar's and yen's medium term rebound has totally finished.
From US existing home sales and new home sales, durable goods orders , Q2 GDP final will be released. Germany Ifo, Gfk and Sep Eurozone PMIs will be main focus in Eurozone. It will be a big week in Canada with retail sales and CPI featured. Other important economic data include Japan AUg CPI and New Zealand Q2 GDP.
GBP/JPY Weekly Outlook
GBP/JPY's strong rebound from 184.47 and break of 193.77 resistance indicates that a short term bottom is finally formed with bullish convergence condition in 4 hours MACD and RSI. Further corrective rebound is expected this week, towards 202.50/206.51 resistance zone. Nevertheless, upside should be limited there and bring down trend resumption. On the downside, below 189.72 will indicate that rebound from 184.47 has completed and should bring retest of this low.
In the bigger picture, whole down trend from 251.09 has resumed after corrective rebound from 192.60 was limited at 215.87 by 55 weeks EMA. Such decline is expected to extend further to 61.8% projection of 251.09 to 192.60 from 215.87 at 179.72 (close to 180 psychological support) first. While some rebound should be seen in near term, medium term outlook will remain bearish as long as 215.87 resistance holds.
In the longer term picture, whole up trend from 148.19 have ended at 251.09 already. At the moment, the favored case is that price actions from 129.32 (95 low) has completed a three wave consolidation up to 251.09. Hence, the downtrend from 251.09 is in favor to extend further at least to long term rising trend line support (now at 175.94). Based on the structure of the current fall from 251.09, it's likely that such decline will extend further to test 148.19 low.
Read more...
Will It Work?
Daily Forex Fundamentals | Written by TheLFB-Forex.com | Sep 21 08 11:36 GMT |
Answer: Absolutely
Reason: It has been done successfully before. A very similar situation happened in Sweden in the early 1990's with the difference being that in the Swedish case, the situation was far worse.
Qualifiers: This doesn't mean stocks can only go up and it does not mean the U.S. cannot go into a recession. However, when you put today's losses in proper perspective with respect to Gross Domestic Product and reference a longer term perspective (3+ years), the Treasury's plan to set up a “bad bank” by purchasing distressed mortgage securities will absolutely work. Not only that, but if we have the foresight to follow what the Swedes did afterwards, perhaps we can see a recovery that will be swifter and possibly even avert a recession.
The Wall Street Journal had the foresight to publish an article written by Joellen Perry on April 7 which covered what happened in Sweden during their early 1990's real estate-driven banking crisis. The parallels are so eerily similar that after reading it I became infuriated that the U.S. was unable to learn from history and avert the present crisis entirely.
How familiar does this sound: A deregulation of credit markets fuels a real estate lending boom which is further enabled by low interest rates, lax supervision and poor lending standards. The result? A massive asset inflation (bubble) which sees real-estate values and stock prices more than double in a few short years. Once the bubble bursts and housing prices decline, the banks start totaling up the losses from all the loans they should never have made in the first place. Liquidity dries up. Unemployment rises and the economy is threatened by (and eventually goes into) a recession.
This was Sweden in the late 1980's and it was the U.S. from 2003 until now.
Mr. Paulson's plan offers basically the same solution as was applied in Sweden back in 1992. The Swedes set up so-called bad banks to manage the troubled real estate assets and by doing so allowed the banks to concentrate on their remaining sound businesses and engender their own recoveries. “It became clear that if we didn't do something quickly, the whole system could collapse. If it's just a few institutions, you can have an ad hoc solution, but when the whole system is in danger, you need a new framework." These are not the words of President Bush or Mr. Paulson, although each have recently expressed sentiments which sound exactly the same. They are the words of Göran Lind, a senior adviser to Sweden's central bank at the time of the crisis.
The steps taken back then allowed the Swedish economy, which first suffered through 12% unemployment and a real recession, to recover relatively quickly. By 1994 and 1995, Swedish GDP posted annual growth rates near 4%.
Some Further Comparisons
According to Ms. Perry's article, the total loan losses on Sweden's biggest banks to some 12% of the country's gross domestic product. A table published by Bloomberg on August 12 put total U.S. bank losses at $246.2 billion, just over 48% the IMF estimate of $510 billion in total global losses. In an economy which was over $11 trillion in 2007, that amounts to about 2.25% of GDP, far less than Sweden's' 12%. While bank losses have not been completely totaled, mitigating this is that fact that U.S. banks have raised a total of $163.2 billion in fresh capital. The IMF is currently estimating global losses to reach over $1 trillion.
Once the banks' troubled assets had been taken over, the Swedish government “required the banks to disclose expected losses immediately and it quickly assigned values to other assets, rather than let banks postpone reporting losses and take gradual write-downs. Banks receiving capital injections or loans surrendered shares to the government to avoid the possibility of rewarding shareholders, and to give Swedish taxpayers a chance to profit when the market improved,” according the WSJ article, and according to Mr. Lind, taxpayers did eventually make a profit once the economy recovered and the government found buyers.
One can only hope to see the U.S. take a lesson from history and enact similar measures now.
Currency and Equity Market Implications
Once the market comes to the realization that a solution has been enacted, the dollar will appreciate. While it is difficult to say exactly when that may occur, there will be a good chance to see this happen in October when the National Association of Realtors reports on September existing home sales and median price. As far as stocks are concerned while we wouldn't bother predicting what will happen in the very short term, if you are an investor with a longer term perspective you are likely being presented with an extraordinary buying opportunity at this time.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
Read more...
Answer: Absolutely
Reason: It has been done successfully before. A very similar situation happened in Sweden in the early 1990's with the difference being that in the Swedish case, the situation was far worse.
Qualifiers: This doesn't mean stocks can only go up and it does not mean the U.S. cannot go into a recession. However, when you put today's losses in proper perspective with respect to Gross Domestic Product and reference a longer term perspective (3+ years), the Treasury's plan to set up a “bad bank” by purchasing distressed mortgage securities will absolutely work. Not only that, but if we have the foresight to follow what the Swedes did afterwards, perhaps we can see a recovery that will be swifter and possibly even avert a recession.
The Wall Street Journal had the foresight to publish an article written by Joellen Perry on April 7 which covered what happened in Sweden during their early 1990's real estate-driven banking crisis. The parallels are so eerily similar that after reading it I became infuriated that the U.S. was unable to learn from history and avert the present crisis entirely.
How familiar does this sound: A deregulation of credit markets fuels a real estate lending boom which is further enabled by low interest rates, lax supervision and poor lending standards. The result? A massive asset inflation (bubble) which sees real-estate values and stock prices more than double in a few short years. Once the bubble bursts and housing prices decline, the banks start totaling up the losses from all the loans they should never have made in the first place. Liquidity dries up. Unemployment rises and the economy is threatened by (and eventually goes into) a recession.
This was Sweden in the late 1980's and it was the U.S. from 2003 until now.
Mr. Paulson's plan offers basically the same solution as was applied in Sweden back in 1992. The Swedes set up so-called bad banks to manage the troubled real estate assets and by doing so allowed the banks to concentrate on their remaining sound businesses and engender their own recoveries. “It became clear that if we didn't do something quickly, the whole system could collapse. If it's just a few institutions, you can have an ad hoc solution, but when the whole system is in danger, you need a new framework." These are not the words of President Bush or Mr. Paulson, although each have recently expressed sentiments which sound exactly the same. They are the words of Göran Lind, a senior adviser to Sweden's central bank at the time of the crisis.
The steps taken back then allowed the Swedish economy, which first suffered through 12% unemployment and a real recession, to recover relatively quickly. By 1994 and 1995, Swedish GDP posted annual growth rates near 4%.
Some Further Comparisons
According to Ms. Perry's article, the total loan losses on Sweden's biggest banks to some 12% of the country's gross domestic product. A table published by Bloomberg on August 12 put total U.S. bank losses at $246.2 billion, just over 48% the IMF estimate of $510 billion in total global losses. In an economy which was over $11 trillion in 2007, that amounts to about 2.25% of GDP, far less than Sweden's' 12%. While bank losses have not been completely totaled, mitigating this is that fact that U.S. banks have raised a total of $163.2 billion in fresh capital. The IMF is currently estimating global losses to reach over $1 trillion.
Once the banks' troubled assets had been taken over, the Swedish government “required the banks to disclose expected losses immediately and it quickly assigned values to other assets, rather than let banks postpone reporting losses and take gradual write-downs. Banks receiving capital injections or loans surrendered shares to the government to avoid the possibility of rewarding shareholders, and to give Swedish taxpayers a chance to profit when the market improved,” according the WSJ article, and according to Mr. Lind, taxpayers did eventually make a profit once the economy recovered and the government found buyers.
One can only hope to see the U.S. take a lesson from history and enact similar measures now.
Currency and Equity Market Implications
Once the market comes to the realization that a solution has been enacted, the dollar will appreciate. While it is difficult to say exactly when that may occur, there will be a good chance to see this happen in October when the National Association of Realtors reports on September existing home sales and median price. As far as stocks are concerned while we wouldn't bother predicting what will happen in the very short term, if you are an investor with a longer term perspective you are likely being presented with an extraordinary buying opportunity at this time.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.
The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.
Read more...
GM Will Draw on Remaining $3.5 Billion in Credit Line
By Jeff Green and Alan Ohnsman
Sept. 20 (Bloomberg) -- General Motors Corp., burning through cash after three years of losses, will tap the remaining $3.5 billion of a revolving credit line as the crisis on Wall Street threatens to crimp companies' ability to borrow.
The balance of the $4.5 billion line will go to help cover restructuring costs, GM said in a statement late yesterday. The Detroit-based automaker said it also completed a $322 million debt-to-equity exchange.
``The disruption in the credit markets have been profound,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``GM has its own set of sizable problems, but I think this was a liquidity play.''
Banks have tightened lending amid the worst housing market since the Great Depression, and this week's bankruptcy of Lehman Brothers Holdings Inc. and government takeover of American International Group Inc. may further curb access to credit.
GM Chief Executive Officer Rick Wagoner has orchestrated a plan to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM, the world's largest automaker, has lost $69.8 billion since the end of 2004, its last profitable year.
``GM felt it was a very prudent thing to have the cash on hand to borrow at very attractive rates,'' spokeswoman Julie Gibson said in an interview. ``The timing was right, given the obvious instability in the financial markets.''
Not Expected
``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.
GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.
The automaker's shares rose $1.68, or 15 percent, to $13.08 yesterday in New York Stock Exchange composite trading. The credit-line action was announced after the close of regular trading. The shares have dropped 47 percent this year.
The credit line has been in place since July 2006. Funds being accessed may also be used to retire $750 million of debt coming due in October and for more than $1.2 billion of reorganization costs for bankrupt Delphi Corp., a former GM unit, the automaker said. Delphi disclosed GM's increased bailout costs Sept. 12.
`Mechanism Test'
GM's use of the first $1 billion from the credit line, announced Aug. 1, was a step to ``test the mechanism'' of that borrowing and help meet costs at a ``seasonal low point,'' Chief Financial Officer Ray Young told analysts on Aug. 13.
GM burned through $3.6 billion in the second quarter and said that at the end of June its supply of cash, marketable securities and other funds available fell to $21 billion from $23.9 billion at the end of the first quarter, and $23.6 billion a year earlier. The revolver wasn't included in those figures.
Steps by the U.S. government to shore up the financial system should prevent GM's mining of its revolver from becoming part of a flood of companies drawing down unused funds, Morgan Keegan's Hastings said.
``The prudent CFO or CEO may be tapping their lines of credit, especially if they know they are going to need liquidity in the short term and they're concerned about the market,'' Hastings said. The Federal Reserve's action ``may prompt people to wait and see now, because people certainly were on the verge of panic.''
Government Action
The U.S. government yesterday said it is taking steps to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Depression.
The government took over AIG, Fannie Mae and Freddie Mac in the past 13 days, a period when Lehman Brothers filed for bankruptcy and Americans pulled a record $89 billion from money- market funds.
The Bush administration sent to Congress today a $700 billion proposal granting broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
Government Loans
GM, along with Ford Motor Co., Chrysler LLC and their suppliers, are also asking Congress to appropriate about $7 billion to back $25 billion in government loans to pay for the shift to build more fuel-efficient models.
It's possible many of the actions taken to gain funds from the market were initiated before the Fed action and new actions may abate, Hastings said.
Ford, the second-largest U.S. automaker, on Sept. 16 said it was assessing the impact of Lehman's failure on $1.13 billion of lending agreements it had with subsidiaries of the investment bank.
GMAC LLC, the money-losing home and auto lender partly owned by GM, renewed a credit facility with Citigroup Inc. yesterday, giving the company access to $13.8 billion, down from $21.4 billion that was available last year. GM sold 51 percent of GMAC to Cerberus Capital Management LP in November 2006.
International Lease Finance Corp., the airplane-leasing company owned by AIG, said Sept. 19 it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
Seeking Cash
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan.
AIG's unit that makes home and auto loans, American General Finance Inc., said Sept. 19 in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
``Everyone is running to cash, hoarding it, and we're not out of the woods yet,'' Mikelic said. ``There's a little less pressure with the government stepping in. But the government needs to keep printing money, printing securities, even if there is negative yield.''
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.
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Sept. 20 (Bloomberg) -- General Motors Corp., burning through cash after three years of losses, will tap the remaining $3.5 billion of a revolving credit line as the crisis on Wall Street threatens to crimp companies' ability to borrow.
The balance of the $4.5 billion line will go to help cover restructuring costs, GM said in a statement late yesterday. The Detroit-based automaker said it also completed a $322 million debt-to-equity exchange.
``The disruption in the credit markets have been profound,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``GM has its own set of sizable problems, but I think this was a liquidity play.''
Banks have tightened lending amid the worst housing market since the Great Depression, and this week's bankruptcy of Lehman Brothers Holdings Inc. and government takeover of American International Group Inc. may further curb access to credit.
GM Chief Executive Officer Rick Wagoner has orchestrated a plan to raise $4 billion to $7 billion by selling assets and adding debt to ensure it has enough liquidity to operate through the end of 2009. GM, the world's largest automaker, has lost $69.8 billion since the end of 2004, its last profitable year.
``GM felt it was a very prudent thing to have the cash on hand to borrow at very attractive rates,'' spokeswoman Julie Gibson said in an interview. ``The timing was right, given the obvious instability in the financial markets.''
Not Expected
``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.
GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.
The automaker's shares rose $1.68, or 15 percent, to $13.08 yesterday in New York Stock Exchange composite trading. The credit-line action was announced after the close of regular trading. The shares have dropped 47 percent this year.
The credit line has been in place since July 2006. Funds being accessed may also be used to retire $750 million of debt coming due in October and for more than $1.2 billion of reorganization costs for bankrupt Delphi Corp., a former GM unit, the automaker said. Delphi disclosed GM's increased bailout costs Sept. 12.
`Mechanism Test'
GM's use of the first $1 billion from the credit line, announced Aug. 1, was a step to ``test the mechanism'' of that borrowing and help meet costs at a ``seasonal low point,'' Chief Financial Officer Ray Young told analysts on Aug. 13.
GM burned through $3.6 billion in the second quarter and said that at the end of June its supply of cash, marketable securities and other funds available fell to $21 billion from $23.9 billion at the end of the first quarter, and $23.6 billion a year earlier. The revolver wasn't included in those figures.
Steps by the U.S. government to shore up the financial system should prevent GM's mining of its revolver from becoming part of a flood of companies drawing down unused funds, Morgan Keegan's Hastings said.
``The prudent CFO or CEO may be tapping their lines of credit, especially if they know they are going to need liquidity in the short term and they're concerned about the market,'' Hastings said. The Federal Reserve's action ``may prompt people to wait and see now, because people certainly were on the verge of panic.''
Government Action
The U.S. government yesterday said it is taking steps to cleanse banks of troubled assets and halt an exodus of investors from money markets in the biggest expansion of federal power over the financial system since the Depression.
The government took over AIG, Fannie Mae and Freddie Mac in the past 13 days, a period when Lehman Brothers filed for bankruptcy and Americans pulled a record $89 billion from money- market funds.
The Bush administration sent to Congress today a $700 billion proposal granting broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
Government Loans
GM, along with Ford Motor Co., Chrysler LLC and their suppliers, are also asking Congress to appropriate about $7 billion to back $25 billion in government loans to pay for the shift to build more fuel-efficient models.
It's possible many of the actions taken to gain funds from the market were initiated before the Fed action and new actions may abate, Hastings said.
Ford, the second-largest U.S. automaker, on Sept. 16 said it was assessing the impact of Lehman's failure on $1.13 billion of lending agreements it had with subsidiaries of the investment bank.
GMAC LLC, the money-losing home and auto lender partly owned by GM, renewed a credit facility with Citigroup Inc. yesterday, giving the company access to $13.8 billion, down from $21.4 billion that was available last year. GM sold 51 percent of GMAC to Cerberus Capital Management LP in November 2006.
International Lease Finance Corp., the airplane-leasing company owned by AIG, said Sept. 19 it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
Seeking Cash
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan.
AIG's unit that makes home and auto loans, American General Finance Inc., said Sept. 19 in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
``Everyone is running to cash, hoarding it, and we're not out of the woods yet,'' Mikelic said. ``There's a little less pressure with the government stepping in. But the government needs to keep printing money, printing securities, even if there is negative yield.''
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.
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Tawuniya Insurance Tells Saudi Exchange It's Not Exposed to AIG
By Abdulla Fardan
Sept. 21 (Bloomberg) -- The Company for Cooperative Insurance, the largest Saudi Arabian insurer by market value, said it hasn't been affected by the difficulties facing American International Group, Inc.
Tawuniya, as the Saudi company also known, has no re- insurance agreement with the AIG, it said in a statement posted on the Saudi Stock Exchange Web site yesterday.
The Saudi company's business with AIG includes only ''limited'' optional re-insurance policies that has been placed with the U.S. insurer on customer's request and have no impact on the Tawuniya financial position, it said in the statement.
To contact the reporter on this story: Abdulla Fardan in Bahrain at afardan@bloomberg.net
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Sept. 21 (Bloomberg) -- The Company for Cooperative Insurance, the largest Saudi Arabian insurer by market value, said it hasn't been affected by the difficulties facing American International Group, Inc.
Tawuniya, as the Saudi company also known, has no re- insurance agreement with the AIG, it said in a statement posted on the Saudi Stock Exchange Web site yesterday.
The Saudi company's business with AIG includes only ''limited'' optional re-insurance policies that has been placed with the U.S. insurer on customer's request and have no impact on the Tawuniya financial position, it said in the statement.
To contact the reporter on this story: Abdulla Fardan in Bahrain at afardan@bloomberg.net
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Kuwait Wealth Fund May Buy Kuwaiti Stocks, Asharq Al-Awsat Says
By Zainab Fattah
Sept. 21 (Bloomberg) -- The Kuwait Investment Authority may inject as much as one billion dinars ($3.75 billion) into Kuwait's stock market to alleviate sharp declines, Asharq al- Awsat reported, citing unidentified officials.
The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen stocks lose 12 billion dinars in value so far this month, the newspaper said.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Sept. 21 (Bloomberg) -- The Kuwait Investment Authority may inject as much as one billion dinars ($3.75 billion) into Kuwait's stock market to alleviate sharp declines, Asharq al- Awsat reported, citing unidentified officials.
The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen stocks lose 12 billion dinars in value so far this month, the newspaper said.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Dubai's Construction Delays Raise Home Prices, EFG-Hermes Says
By Arif Sharif
Sept. 21 (Bloomberg) -- Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
Dubai residential property prices jumped 14.4 percent so far this year, EFG-Hermes estimates, versus its expectations of a 5-to-10 percent rise for 2008. Prices rose 18.9 percent in 2007 compared with its forecast of a 10-15 percent gain.
The supply of new property ``came short of our expectations for a fourth year,'' Sana Kapadia, an analyst at Egypt's biggest publicly-traded investment bank, said in an e- mailed report. ``The supply of new units remains a key determinant of the timing of a potential correction.''
The constraints have halted construction of some projects and stalled the start of others, and EFG-Hermes' expectations of a delivery of 64,000 housing units in 2008 is unlikely to be met, the report said. Supply is expected to peak in the first half of 2009, when 70,000 units will be delivered, it added.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause the price correction to deepen, EFG-Hermes warned.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Sept. 21 (Bloomberg) -- Delays in building homes in Dubai due to a shortage of contractors, scarcity of construction materials and cost increases are helping raise property prices in the emirate, EFG-Hermes Holding SAE said in a report today.
Dubai residential property prices jumped 14.4 percent so far this year, EFG-Hermes estimates, versus its expectations of a 5-to-10 percent rise for 2008. Prices rose 18.9 percent in 2007 compared with its forecast of a 10-15 percent gain.
The supply of new property ``came short of our expectations for a fourth year,'' Sana Kapadia, an analyst at Egypt's biggest publicly-traded investment bank, said in an e- mailed report. ``The supply of new units remains a key determinant of the timing of a potential correction.''
The constraints have halted construction of some projects and stalled the start of others, and EFG-Hermes' expectations of a delivery of 64,000 housing units in 2008 is unlikely to be met, the report said. Supply is expected to peak in the first half of 2009, when 70,000 units will be delivered, it added.
The diversion of liquidity from Dubai to Abu Dhabi, the spread of weaker global economic conditions in emerging markets and the declining affordability of property are some of the risk factors that could cause the price correction to deepen, EFG-Hermes warned.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Amlak, Tamweel, Rebound After Falling to 52-Week Lows Last Week
By Arif Sharif
Sept. 21 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates' two biggest mortgage lenders, jumped more than 10 percent in Dubai as investors hunted for bargains after the shares fell to annual lows last week.
Amlak jumped 9.8 percent to 3.6 dirhams at 11:11 a.m. Dubai time after rising as much as 14 percent earlier in the day. Tamweel rose 8.4 percent to 4.13 dirhams after gaining 11.3 percent. Amlak lost almost 14 percent in the past two weeks and Tamweel fell 34 percent, both hitting 52-week lows on Sept. 15.
Tamweel, the U.A.E.'s second-biggest mortgage provider by market value, said Sept. 9 its deputy chief executive officer had been held by Dubai government authorities in connection with an ongoing corruption investigation.
``This is an expected rebound after prices dropped to very attractive levels last week,'' said Nadine Wehbe, a senior analyst at Orion Brokers in Dubai. ``The investigations into Tamweel had an impact on the entire sector as well and the shares were affected badly, which it shouldn't have.''
Amlak trades at a price-earnings multiple of 9.7 times to its estimated 2008 earnings and Tamweel at an estimated PE of 5.4, according to Bloomberg data.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Sept. 21 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates' two biggest mortgage lenders, jumped more than 10 percent in Dubai as investors hunted for bargains after the shares fell to annual lows last week.
Amlak jumped 9.8 percent to 3.6 dirhams at 11:11 a.m. Dubai time after rising as much as 14 percent earlier in the day. Tamweel rose 8.4 percent to 4.13 dirhams after gaining 11.3 percent. Amlak lost almost 14 percent in the past two weeks and Tamweel fell 34 percent, both hitting 52-week lows on Sept. 15.
Tamweel, the U.A.E.'s second-biggest mortgage provider by market value, said Sept. 9 its deputy chief executive officer had been held by Dubai government authorities in connection with an ongoing corruption investigation.
``This is an expected rebound after prices dropped to very attractive levels last week,'' said Nadine Wehbe, a senior analyst at Orion Brokers in Dubai. ``The investigations into Tamweel had an impact on the entire sector as well and the shares were affected badly, which it shouldn't have.''
Amlak trades at a price-earnings multiple of 9.7 times to its estimated 2008 earnings and Tamweel at an estimated PE of 5.4, according to Bloomberg data.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Gulf General Investment, Baader Bank Merge Brokerage Units
By Zainab Fattah
Sept. 21 (Bloomberg) -- Gulf General Investment Co., an investment company based in the United Arab Emirates, merged its brokerage unit with Germany's Baader Bank AG.
The merger will create Gulf Baader Capital Market L.L.C., the companies said in a joint statement posted on the Web site of Dubai's bourse today.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Sept. 21 (Bloomberg) -- Gulf General Investment Co., an investment company based in the United Arab Emirates, merged its brokerage unit with Germany's Baader Bank AG.
The merger will create Gulf Baader Capital Market L.L.C., the companies said in a joint statement posted on the Web site of Dubai's bourse today.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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Persian Gulf Shares Rebound on Fed's Bailout Plan; Emaar Climbs
By Zainab Fattah
Sept. 21 (Bloomberg) -- Persian Gulf shares advanced as the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets and after global markets rallied late last week.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped the most since 2005. National Bank of Abu Dhabi PJSC rose the most in almost eight months and Zain gained after raising $4.49 billion through a capital increase.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management at Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,229.87 at 1:21 p.m. local time, its biggest one-day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.8 percent, while the Kuwait Stock Exchange Index rose 3.3 percent.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies. Yesterday, the Bush administration sought unchecked power from congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets. Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Injection
The Kuwait Investment Authority may inject as much as 1 billion dinars ($3.75 billion) into Kuwait's stock market to alleviate recent declines, Asharq al-Awsat reported today, citing unidentified officials. The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen shares lose 12 billion dinars in value so far this month, the newspaper said.
Emaar jumped 13 percent to 7.9 dirhams, its biggest gain since June 2005. Aldar Properties PJSC climbed 9.9 percent to 7.79 dirhams. Emaar has still dropped 13 percent this month, while Aldar is down 20 percent so far in September.
`Most Hit'
``Real-estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai.
Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-state project in Cairo, Al-Alam al-Yom reported Sept. 18, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams, the biggest gain since Jan. 23.
Zain soared 7.3 percent to 1,760 fils, its largest advance since November 2005. The Kuwaiti phone company with operations in 22 Middle Eastern and African countries said it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
Tadawul Falls
Oman's Muscat Securities Market 30 Index rose 4.3 percent, its largest gain since November 2000. Qatar's Doha Securities Market Index surged 7.9 percent, while the Bahrain All Share Index added 0.8 percent. Saudi Arabia's Tadawul All Share Index declined 0.6 percent, ending two days of advances.
Al-Mazaya Holding Co. climbed 5.9 percent to 720 fils. The Kuwait-based property developer said it plans to set up two new units in Bahrain and Ajman, the United Arab Emirates.
Gulf General Investment Co. added 4.4 percent to 9.45 dirhams. The investment company based in the U.A.E. merged its brokerage unit with Germany's Baader Bank AG.
National Central Cooling Co. advanced 7.3 percent to 1.62 dirhams. The air-conditioning company, known as Tabreed, plans to spend 4 billion dirhams ($1.1 billion) in the next two years on expansion.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Sept. 21 (Bloomberg) -- Persian Gulf shares advanced as the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets and after global markets rallied late last week.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped the most since 2005. National Bank of Abu Dhabi PJSC rose the most in almost eight months and Zain gained after raising $4.49 billion through a capital increase.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management at Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,229.87 at 1:21 p.m. local time, its biggest one-day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.8 percent, while the Kuwait Stock Exchange Index rose 3.3 percent.
U.S. stocks surged late last week in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies. Yesterday, the Bush administration sought unchecked power from congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets. Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Injection
The Kuwait Investment Authority may inject as much as 1 billion dinars ($3.75 billion) into Kuwait's stock market to alleviate recent declines, Asharq al-Awsat reported today, citing unidentified officials. The Kuwaiti government last week urged the KIA, the country's $250 billion sovereign wealth fund, to infuse 300 million dinars into Kuwait's stock market, which has seen shares lose 12 billion dinars in value so far this month, the newspaper said.
Emaar jumped 13 percent to 7.9 dirhams, its biggest gain since June 2005. Aldar Properties PJSC climbed 9.9 percent to 7.79 dirhams. Emaar has still dropped 13 percent this month, while Aldar is down 20 percent so far in September.
`Most Hit'
``Real-estate stocks are reacting because they are the most volatile and liquid and were most hit as foreign investors withdrew when global markets plummeted earlier this month,'' said Sherif Abdel Khalek, regional sales executive at Beltone Securities Brokerage in Dubai.
Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-state project in Cairo, Al-Alam al-Yom reported Sept. 18, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams, the biggest gain since Jan. 23.
Zain soared 7.3 percent to 1,760 fils, its largest advance since November 2005. The Kuwaiti phone company with operations in 22 Middle Eastern and African countries said it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
Tadawul Falls
Oman's Muscat Securities Market 30 Index rose 4.3 percent, its largest gain since November 2000. Qatar's Doha Securities Market Index surged 7.9 percent, while the Bahrain All Share Index added 0.8 percent. Saudi Arabia's Tadawul All Share Index declined 0.6 percent, ending two days of advances.
Al-Mazaya Holding Co. climbed 5.9 percent to 720 fils. The Kuwait-based property developer said it plans to set up two new units in Bahrain and Ajman, the United Arab Emirates.
Gulf General Investment Co. added 4.4 percent to 9.45 dirhams. The investment company based in the U.A.E. merged its brokerage unit with Germany's Baader Bank AG.
National Central Cooling Co. advanced 7.3 percent to 1.62 dirhams. The air-conditioning company, known as Tabreed, plans to spend 4 billion dirhams ($1.1 billion) in the next two years on expansion.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Alitalia May Be Grounded Within a Week, Matteoli Tells Sole
By Andrew Davis
Sept. 21 (Bloomberg) -- Alitalia SpA will be grounded within six days if a buyer isn't found for the insolvent carrier, Italian Transport Minister Altero Matteoli said in an interview with Il Sole-24 Ore.
Vito Riggio, head of Italian airline regulator Enac, meets with Alitalia officials tomorrow to discuss revoking its temporary license if there isn't evidence the carrier has enough funds to operate for three months, the paper said. Riggio has said flights would be grounded seven to 10 days after revocation, Sole reported.
``There isn't that much time, the decision will have to be taken sooner,'' Matteoli told the newspaper.
The only way for the airline to survive is for unions to reverse course and support an Italian bid for the carrier's commercial flight business by CAI, an investment group led by Piaggio & C. SpA Chairman Roberto Colaninno, Matteoli told the newspaper.
that have opposed an
To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net
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Sept. 21 (Bloomberg) -- Alitalia SpA will be grounded within six days if a buyer isn't found for the insolvent carrier, Italian Transport Minister Altero Matteoli said in an interview with Il Sole-24 Ore.
Vito Riggio, head of Italian airline regulator Enac, meets with Alitalia officials tomorrow to discuss revoking its temporary license if there isn't evidence the carrier has enough funds to operate for three months, the paper said. Riggio has said flights would be grounded seven to 10 days after revocation, Sole reported.
``There isn't that much time, the decision will have to be taken sooner,'' Matteoli told the newspaper.
The only way for the airline to survive is for unions to reverse course and support an Italian bid for the carrier's commercial flight business by CAI, an investment group led by Piaggio & C. SpA Chairman Roberto Colaninno, Matteoli told the newspaper.
that have opposed an
To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net
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Kuwait Zain Gains Most in Three Years on U.S. Bank Rescue Plan
By Glen Carey
Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``This is mainly backed by the recovery we are witnessing in global capital markets all over the world,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``The regional markets are following the U.S. and Asian markets higher.''
Zain advanced 7.3 percent to 1,760 fils as of 12:29 p.m., its largest advance since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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Sept. 21 (Bloomberg) -- Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, surged the most in almost three years following a global rally after the U.S. Federal Reserve and the European Central Bank agreed to inject cash into the financial system.
``This is mainly backed by the recovery we are witnessing in global capital markets all over the world,'' Chandresh Bhatt, an analyst at Kuwait-based Global Financial House KSCC, said today in a phone interview from Kuwait. ``The regional markets are following the U.S. and Asian markets higher.''
Zain advanced 7.3 percent to 1,760 fils as of 12:29 p.m., its largest advance since November 2005. The company said yesterday it raised $4.49 billion through a capital increase in which 99 percent of its shareholders subscribed.
National Mobile Telecommunications Co., the Kuwaiti phone company bought by Qatar Telecom Q.S.A. last year, gained 14 percent to 1,620 fils.
U.S. stocks surged last week in the biggest two-day global rally in 38 years after the Federal Reserve, the European Central Bank and the Bank of Japan agreed with counterparts in Switzerland, the U.K. and Canada to inject cash into the financial system. Yesterday, the Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
``Telecom companies have the most sustainable cash flow, compared with any other sectors in this region,'' Kunal Bajaj, an analyst at HSBC Holdings Plc, said in a telephone interview from Dubai. ``This sector is considered to be a safe haven.''
Global Investment House has a ``hold'' rating for Zain and a ``buy'' for National Mobile, while HSBC has a ``neutral'' rating for Zain and an ``overweight'' for National Mobile.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
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China Expects Record 2008 Grain Output on Larger Planting Area
By Lee Spears
Sept. 21 (Bloomberg) -- China, the world's biggest consumer of grain, may harvest a record output this year after farmers seeded more land with rice, corn and soybeans, the Ministry of Agriculture said.
The planting area this year was increased to 1.6 billion mu (263 million acres), 10 million mu more than last year, based on estimates, the ministry said in a statement yesterday on its Web site. The ministry didn't give estimates for total output this year.
China is focusing on raising crop yields to ensure it has enough to feed its 1.3 billion people. Increasing incomes and population are fueling food demand even as more agricultural workers seek higher-paying jobs in cities. Higher grain output this year would make the fifth increase in as many years, something China hasn't accomplished since its economy opened to the world 30 years ago, the ministry's statement said.
``This lays a solid foundation for maintaining stable, rapid economic development and curbing rapid price increases,'' the statement said.
Yield per unit area may also rise to records for rice, corn and soybean, the statement said. China this year doubled four major agricultural subsidies to 103 billion yuan ($15.1 billion), it said.
To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.
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Sept. 21 (Bloomberg) -- China, the world's biggest consumer of grain, may harvest a record output this year after farmers seeded more land with rice, corn and soybeans, the Ministry of Agriculture said.
The planting area this year was increased to 1.6 billion mu (263 million acres), 10 million mu more than last year, based on estimates, the ministry said in a statement yesterday on its Web site. The ministry didn't give estimates for total output this year.
China is focusing on raising crop yields to ensure it has enough to feed its 1.3 billion people. Increasing incomes and population are fueling food demand even as more agricultural workers seek higher-paying jobs in cities. Higher grain output this year would make the fifth increase in as many years, something China hasn't accomplished since its economy opened to the world 30 years ago, the ministry's statement said.
``This lays a solid foundation for maintaining stable, rapid economic development and curbing rapid price increases,'' the statement said.
Yield per unit area may also rise to records for rice, corn and soybean, the statement said. China this year doubled four major agricultural subsidies to 103 billion yuan ($15.1 billion), it said.
To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.
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Australia's Future Fund May Buy Stakes in Companies, Age Says
By Madelene Pearson
Sept. 21 (Bloomberg) -- The Australian Government's A$64 billion ($53.4 billion) Future Fund is studying buying stakes in companies and discounted shares amid chaos in global financial markets, the Age newspaper said, without citing anyone.
The Melbourne-based fund, set up to cover the cost of public servants' retirement benefits, is studying a range of private equity deals under which it would buy slices of companies whose shares are not traded on the Australian stock exchange, the newspaper said. It is also looking to invest in shares and infrastructure deals, the report said.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Australia's Qantas Takes Delivery of its First A380 in Sydney
By Madelene Pearson
Sept. 21 (Bloomberg) -- Qantas Airways Ltd., Australia's largest carrier, took delivery of its first A380 aircraft after the plane landed in Sydney today.
The plane left Airbus SAS headquarters in Toulouse, France on Sept. 19 headed for Sydney, configured with 450 seats in four cabins, Sydney-based Qantas said in a statement that day.
The new airplane joins the fleet as Qantas slashes jobs and routes on slowing demand for air travel. The airline, with a near-spotless safety record, was ordered by a government regulator this month to improve the maintenance of planes after several incidents on its flights raised concerns that standards may be slipping.
``This will be a good distraction from all the negatives that they have encountered recently,'' said Peter Harbison, managing director of the Centre for Asia Pacific Aviation.
Qantas will fly the world's largest commercial jet to Los Angeles from Melbourne on Oct. 20, the carrier has said. It will receive two more of the planes by the end of the year.
The airline, the third operator of the double-decker aircraft after Singapore Airlines Ltd. and Dubai-based Emirates, plans to also start services between Sydney and London via Singapore from Jan. 16.
Singapore Air, the first to operate the A380, flies the superjumbo to cities including Sydney and London from Singapore. The carrier boosted services to London after it took delivery of its sixth plane on Sept. 18.
Adding Capacity
Qantas, with a total of 20 A380s on order, is the second- biggest customer for the model after Emirates. The airline has placed orders with Airbus and Boeing Co. worth A$35 billion ($28 billion) at list prices to replace older planes and to add capacity.
The Qantas A380 will have 14 seats in first class, 72 in business, 32 in premium economy and 332 in economy class, Qantas said on Sept. 19.
The A380, which burns 12 percent less fuel per seat than older planes of comparable size, may also help Qantas counter higher fuel costs. The airline has slashed routes and grounded some aircraft since June and predicted profit in fiscal 2009 will fall about 47 percent after jet fuel prices surged.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Sinosteel Wins Approval to Buy Stake in Murchison
By Madelene Pearson
Sept. 21 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, won Australian government approval to buy as much as 49.9 percent of Murchison Metals Ltd.
The Chinese company had previously sought approval to acquire up to 100 percent of Perth-based Murchison, Australia's Treasurer Wayne Swan said today. That application was withdrawn, he said. A 49.9 percent stake in Murchison would be worth A$251 million ($202 million) based on the stock's last traded price.
Sinosteel controls Midwest Corp., a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp. at Oakajee in the state.
``Overseas investment develops assets,'' Andrew Forrest, chief executive officer of iron-ore miner Fortescue Metals Group Ltd., said in an interview broadcast on Sky Business News today before the approval was issued. ``I think you will continue to see growth in foreign investment in Australia because we are resource rich and capital poor.''
Murchison climbed 11 percent to A$1.22 on the Australian Stock Exchange when last traded on Sept. 19 in Sydney. The shares fell to the lowest in almost two years the previous day amid concern the cost of borrowing funds needed to develop the project will increase.
Initial Study
An initial study into developing the Oakajee project is scheduled to be completed by the middle of next year and, if approved, the port may open as early as 2012. Murchison and Mitsubishi won a tender to develop the port in July, beating a rival proposal from a China-backed venture.
``In approving Sinosteel's application, I have determined that a shareholding of up to 49.9 percent in Murchison will maintain diversity of ownership within the mid-west region,'' Swan said in an e-mailed statement. ``The development of such potentially significant new resource areas should occur through arrangements that are open to multiple investors.''
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Sept. 21 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, won Australian government approval to buy as much as 49.9 percent of Murchison Metals Ltd.
The Chinese company had previously sought approval to acquire up to 100 percent of Perth-based Murchison, Australia's Treasurer Wayne Swan said today. That application was withdrawn, he said. A 49.9 percent stake in Murchison would be worth A$251 million ($202 million) based on the stock's last traded price.
Sinosteel controls Midwest Corp., a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp. at Oakajee in the state.
``Overseas investment develops assets,'' Andrew Forrest, chief executive officer of iron-ore miner Fortescue Metals Group Ltd., said in an interview broadcast on Sky Business News today before the approval was issued. ``I think you will continue to see growth in foreign investment in Australia because we are resource rich and capital poor.''
Murchison climbed 11 percent to A$1.22 on the Australian Stock Exchange when last traded on Sept. 19 in Sydney. The shares fell to the lowest in almost two years the previous day amid concern the cost of borrowing funds needed to develop the project will increase.
Initial Study
An initial study into developing the Oakajee project is scheduled to be completed by the middle of next year and, if approved, the port may open as early as 2012. Murchison and Mitsubishi won a tender to develop the port in July, beating a rival proposal from a China-backed venture.
``In approving Sinosteel's application, I have determined that a shareholding of up to 49.9 percent in Murchison will maintain diversity of ownership within the mid-west region,'' Swan said in an e-mailed statement. ``The development of such potentially significant new resource areas should occur through arrangements that are open to multiple investors.''
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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U.A.E. Shares Rebound on Fed's Bailout Plan; Emaar, NBAD Climb
By Zainab Fattah
Sept. 21 (Bloomberg) -- United Arab Emirates shares advanced after the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped. National Bank of Abu Dhabi PJSC rose the most almost eight months and Bank Muscat SAOG also surged.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management for Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,219.52 at 11:01 a.m. local time, its biggest one- day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.4 percent. Oman's Muscat Securities Market 30 Index rose 4.9 percent, heading for its largest gain since November 2000.
U.S. stocks surged on Sept. 19 in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.
The Treasury late yesterday clarified the types of assets it would purchase. Treasury Secretary Henry Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage-related assets and, after consultation with the Federal Reserve chairman, ``other assets, as deemed necessary to effectively stabilize financial markets.'' Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Emaar jumped 14 percent to 7.99 dirhams, its biggest gain since June 2005. Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-estate project in Cairo, Al-Alam al-Yom said, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams. Bank Muscat, Oman's largest lender, soared 7.7 percent to 1.216 rials.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Sept. 21 (Bloomberg) -- United Arab Emirates shares advanced after the U.S. government announced a plan to buy $700 billion in bad mortgage investments from financial companies to purge banks of bad assets.
Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, jumped. National Bank of Abu Dhabi PJSC rose the most almost eight months and Bank Muscat SAOG also surged.
``The Fed's bailout will write off bad debt which is great news and gives banks the opportunity to recover,'' said Haissam Arabi, a Dubai-based managing director of asset management for Shuaa Capital PSC who oversees $1.8 billion.
The Dubai Financial Market General Index climbed 7.8 percent to 4,219.52 at 11:01 a.m. local time, its biggest one- day gain since Jan. 23. The Abu Dhabi Securities Exchange General Index added 5.4 percent. Oman's Muscat Securities Market 30 Index rose 4.9 percent, heading for its largest gain since November 2000.
U.S. stocks surged on Sept. 19 in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.
The Treasury late yesterday clarified the types of assets it would purchase. Treasury Secretary Henry Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage-related assets and, after consultation with the Federal Reserve chairman, ``other assets, as deemed necessary to effectively stabilize financial markets.'' Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill.
Emaar jumped 14 percent to 7.99 dirhams, its biggest gain since June 2005. Emaar Misr for Development SAE, a unit of Emaar, will invest 12 billion Egyptian pounds ($2.1 billion) in a luxury real-estate project in Cairo, Al-Alam al-Yom said, citing the company's Chief Executive Officer Sameh Mohtadi.
National Bank of Abu Dhabi, the U.A.E.'s second-biggest bank by assets, surged 7 percent to 16 dirhams. Bank Muscat, Oman's largest lender, soared 7.7 percent to 1.216 rials.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Treasury Seeks Authority to Buy Mortgages Unchecked by Courts
By Alison Fitzgerald and John Brinsley
Sept. 21 (Bloomberg) -- The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
Through his plan, Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill. The bill would prevent courts from reviewing actions taken under its authority.
``He's asking for a huge amount of power,'' said Nouriel Roubini, an economist at New York University. ``He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.''
As congressional aides and officials scrutinized the proposal, the Treasury late yesterday clarified the types of assets it would purchase. Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage- related assets and, after consultation with the Federal Reserve chairman, ``other assets, as deemed necessary to effectively stabilize financial markets,'' the Treasury said in a statement.
The Treasury would also have discretion, after discussions with the Fed, to make non-U.S. financial institutions eligible under the program.
The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services. Paulson is asking for the power to hire asset managers and award contracts to private companies. Most provisions of the proposal expire after two years from the date of enactment.
Schumer Warning
A failure by the government to support the U.S. financial system could lead to ``a depression,'' Senator Charles Schumer, a New York Democrat told reporters yesterday. ``To do nothing is to risk the kind of economic downturn this country hasn't seen in 60 years.''
The Treasury is seeking authority to step in as buyer of last resort for mortgage-linked assets that few other financial institutions in the world want to buy, following government takeovers of mortgage giants Fannie Mae and Freddie Mac and insurer American International Group Inc.
``Democrats will work with the administration to ensure that our response to events in the financial markets is swift,'' House Speaker Nancy Pelosi said in a statement.
The majority party will seek to reduce mortgage foreclosures and create ``fast-track authority'' for an overhaul of financial regulation, Pelosi said. Democrats will ensure ``the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms.''
Executive Pay
The proposal will include curbs on executive pay for the companies whose assets the government will be buying, Steve Adamske, a spokesman for Representative Barney Frank, said yesterday in an interview.
Democrats also will include a plan to stem foreclosures, which may involve tapping the loan-modification abilities of the Federal Housing Administration, the Federal Deposit Insurance Corp., and Freddie Mac and Fannie Mae, Adamske said. Frank, a Democrat from Massachusetts, is chairman of the House Financial Services Committee.
``The consequences of inaction could be catastrophic,'' Senate Majority Leader Harry Reid said in a statement.
``While the Bush proposal raises some serious issues, we need to resolve them quickly,'' he said. ``I am confident that, working together, we will.''
House minority leader John Boehner, an Ohio Republican, said yesterday he is reviewing the proposal but didn't say whether he was inclined to support it.
`Furious' Boehner
``The American people are furious that we're in this situation, and so am I,'' Boehner said in a statement. ``We need to do everything possible to protect the taxpayers from the consequences of a broken Washington.''
Congress, which may pass legislation as soon as Sept. 26, needs to ``make sure there are protections built in for taxpayers,'' said Schumer, a New York Democrat on the banking committee. Lawmakers should ensure ``taxpayers who gave the money will be put ahead of the stockholders, bondholders and others.''
Paulson is seeking an expansion of federal influence over markets that hasn't been seen since the Great Depression, said Charles Geisst, author of ``100 Years of Wall Street'' and a finance professor at Manhattan College in New York.
Hoover Era
Geisst likened the plan to the Reconstruction Finance Corp., which was chartered by Herbert Hoover in 1932 with the goal of boosting economic activity by lending money after credit markets seized up.
President George W. Bush said he called leaders in both houses of Congress and ``found a common understanding of how severe the problem is and how necessary it is to get something done quickly.''
``This is going to be a big package because it's a big problem,'' Bush said following a meeting with Colombian President Alvaro Uribe at the White House. ``We need to get this done quickly, and the cleaner the better.''
Democratic presidential nominee Barack Obama said in a radio address that he ``fully supports'' Paulson and Fed Chairman Ben S. Bernanke's efforts to stabilize the financial system. The plan, however, should benefit both main street and Wall Street, he said.
Republican Presidential nominee John McCain ``looks forward'' to reviewing the proposal while focusing at least in part on ``minimizing the burden on the taxpayer,'' said Jill Hazelbaker, communications director for the McCain campaign.
Ban Legal Challenges
The ban on legal challenges of actions by Treasury is ``distasteful, it's unfortunate and it's bad precedent, but this is an emergency and you have to act,'' said Jerry Markham, a law professor at Florida State University and author of ``A Financial History of the United States.''
``What you don't want happen is to have lawsuits that will slow things down and cause problems,'' he said.
The proposal would raise the nation's debt ceiling to $11.315 trillion from $10.615 trillion and require the Treasury secretary to report back to Congress three months after Treasury first uses its new powers, and then semiannually after that.
Paulson would gain discretion to act as he ``deems necessary'' to hire people, enter into contracts and issue regulations related to a revival of U.S. mortgage finance, according to a three-page proposal. The Treasury would ``take into consideration'' protecting taxpayers and promoting market stability.
Hiring Authority
The Treasury may hire managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, Treasury said yesterday. The document specifies that Treasury may buy only assets issued or originated on or before Sept. 17.
The House will pass legislation to implement the plan by the end of this week, and the Senate will act soon after, Frank said on Sept. 19 in an interview on Bloomberg Television's ``Political Capital with Al Hunt.''
Bush said yesterday he's unconcerned that the price tag on the package may seem high.
``I'm sure there are some of my friends out there that are saying, `I thought this guy was a market guy, what happened to him?''' the president said. ``My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''
The Bush administration seeks ``dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis,'' said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. ``We are taking a huge leap of faith.''
To contact the reporter on this story: Alison Fitzgerald in Washingtont ; John Brinsley in Washington at jbrinsley@bloomberg.net
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Home Sales, Durables Orders Probably Fell: U.S. Economy Preview
By Bob Willis
Sept. 21 (Bloomberg) -- U.S. home sales and orders for long-lasting goods probably fell in August, indicating growth had already slowed heading into the latest financial meltdown, economists said before reports this week.
Combined sales of new and existing homes dropped to a 5.45 million pace last month, down 1.2 percent from July, according to the median estimate of economists surveyed by Bloomberg News. Orders for durable goods, products meant to last several years, probably fell 1.8 percent.
``There was a fairly significant slowdown in progress even before we got to the financial fireworks,'' said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts.
The three-year housing slump that precipitated the subprime crisis, triggering losses that brought down giants such as Lehman Brothers Holdings Inc. and American International Group Inc., may spell the end of the economic expansion. Consumers are unlikely to benefit immediately from federal efforts to shield financial firms from tainted assets.
``The government's bailout plan may be great for investors, but it doesn't do much for the economy over the near-term,'' said Russell Price, a senior economist at H&R Block Financial Advisors in Detroit. ``Consumers are still going to find financing everything from homes to big-ticket appliances tough to come by.''
The National Association of Realtors' report on home resales is due Sept. 24. Purchases declined to a 4.94 million annual pace from 5 million in July, according to the survey median. Sales reached a 4.85 million pace in June, the fewest since comparable records began in 1999.
New-Home Sales
A day later, the Commerce Department is forecast to report that sales of new houses dropped to an annual pace of 510,000 from 515,000 in July, according to survey estimates. Sales of existing and new homes are down 35 percent from their July 2005 peak.
As sales shrank, builders scaled back construction projects to pare swelling inventories. Work began in August on the fewest houses since 1991, the Commerce Department reported last week. The number of building permits issued also fell, signaling construction cutbacks will continue to hurt the economy.
``The biggest issue is consumer confidence in housing right now,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey's largest homebuilder, said in a Sept. 19 interview on Bloomberg Television. ``It remains a very challenging environment.''
No Bottom
Hovnanian said sales in ``some select markets,'' such as northern California and the Washington suburbs in Virginia, ``have really started to pick up.'' It's ``absolutely'' too early to call a bottom for the market, he said.
Stricter lending regulations and tumbling home prices make it harder for Americans to tap home equity for extra cash. Consumer spending in the third quarter will probably be the weakest since 1991, according to economists surveyed earlier this month.
``Tight credit conditions, the ongoing housing contraction and some slowing in export growth are likely to weigh on economic growth over the next few quarters,'' the Federal Reserve said Sept. 16 as it held the benchmark lending rate unchanged at 2 percent.
Three days later, the government announced it would move to cleanse banks of troubled assets as part of a plan that Treasury Secretary Henry Paulson said would cost ``hundreds of billions.''
The report on durable goods, due from the Commerce Department on Sept. 25, is also projected to show that orders excluding transportation equipment fell 0.5 percent in August, according to the Bloomberg survey.
Auto Slump
Automakers have led the slump in durables. Sales of cars and light trucks over the last three months were the weakest since 1993, according to Bloomberg calculations based on industry figures.
Struggling to regain market share from foreign carmakers, General Motors Corp., Ford Motor Co. and Chrysler LLC last week urged U.S. lawmakers to fund $25 billion in low-interest loans to help develop more fuel-efficient vehicles.
``Your urgent attention to this issue is critical to the future of the American economy and the manufacturing sector,'' GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli, chief executive officers of the three U.S.-based automakers, wrote to House Speaker Nancy Pelosi.
On Sept. 26, the Reuters/University of Michigan final estimate of consumer sentiment for September may show confidence rose for a third month after reaching a 28-year low in June as gasoline prices tumbled.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Exist Homes Mlns 9/24 Aug. 5.00 4.94
Exist Homes MOM% 9/24 July 3.1% -1.2%
Durables Orders MOM% 9/25 Aug. 1.3% -1.8%
Durables Ex-Trans MOM% 9/25 Aug. 0.7% -0.5%
Initial Claims ,000's 9/25 Sept. 20 455 448
Cont. Claims ,000's 9/25 Sept. 13 3478 3505
New Home Sales ,000's 9/25 Aug. 515 510
New Home Sales MOM% 9/25 Aug. 2.4% -1.0%
GDP Annual QOQ% 9/26 2Q F 3.3% 3.3%
Personal Consump. QOQ% 9/26 2Q F 1.7% 1.7%
GDP Prices QOQ% 9/26 2Q F 1.2% 1.2%
Core PCE Prices QOQ% 9/26 2Q F 2.1% 2.1%
U of Mich Conf. Index 9/26 Sept. F 73.1 70.5
================================================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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