By Poppy Trowbridge and Jon Menon
Sept. 28 (Bloomberg) -- The U.K. government will step in to protect Bradford & Bingley Plc depositors, stopping short of confirming reports that the bank will be nationalized, Treasury minister Yvette Cooper said.
``Financial stability has got to be protected, but so have ordinary savers,'' Cooper said on British Broadcasting Corp. television today. ``There are limits to what I can say, but there is a full range of work that has been under way.''
Chancellor of the Exchequer Alistair Darling will make a statement before 8 a.m. tomorrow outlining the government's plan, which the BBC said would include some form of nationalization. Ministers are working on other options including a partial government takeover, acquisition by a rival bank or a break up and purchase of assets by several buyers.
Bradford & Bingley, the nation's biggest lender to landlords, is the third major British bank to run into trouble since credit markets seized up around the globe last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Bank Plc last week.
Talk of another government-led bank bailout reopened a rift between U.K. political parties, with the Conservatives charging that Prime Minister Gordon Brown has held up regulatory reform and Labour ministers saying the opposition is playing politics.
Conservative View
``We've got a regulatory system set up by our prime minister that seems to have completely failed to spot that something was wrong, to get something done about it, and we've got a bunch of politicians running the country who've had a year to pass this legislation, which we've said repeatedly we will support,'' Conservative leader David Cameron told the BBC.
U.S. lawmakers today said they made a breakthrough in talks on a $700 billion plan to buy assets from financial companies affected by a record number of home foreclosures, in an effort to revive credit markets.
After talks with President George W. Bush last week, Brown and Darling ``have worked right through this weekend to sort out the problems we're facing,'' Geoffrey Hoon, a Cabinet minister, told Sky News. ``We will act to ensure that the interests of depositors are properly protected.''
The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England- based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc.
`Inevitable' Move
``It was inevitable that nationalization has been decided as the risk has been too great,'' said Howard Wheeldon, a senior strategist at BGC Partners in London. ``It's a very sensible solution.''
A spokesman for the U.K. Treasury said discussions about Bradford & Bingley are ``ongoing.'' He declined to be identified by name, in accordance with departmental policy.
A voicemail message left on the cellphone of Bradford & Bingley spokesman Tony McGarahan today wasn't immediately answered. Late yesterday, he said the company was working with regulators ``to clarify the bank's future.''
Nationalization is ``a necessary move to maintain stability,'' said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London. ``Bradford & Bingley is unable to fund itself in the current environment because there's not enough money being lent between banks.''
Landlords
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, bringing its share of the U.K. buy-to-let market to 19 percent. About 17 percent of the bank's loans go to customers who certify their own income on application and typically have a higher level of default than standard borrowers. Bad debts in the first half jumped to 74.6 million pounds from 5.3 million pounds last year.
Bradford & Bingley's fell as the credit crunch made it impossible to find funds for new loans and day-to-day operation.
Deposits at the bank amount to only slightly more than half of loans outstanding, which means it depends on capital markets for about half of its financing. Bradford & Bingley was forced to curtail new business when those markets dried up and the cost of inter-bank borrowing soared causing banks to hoard cash following the collapse of the U.S. subprime mortgage-market.
Political Rift
Cameron, interviewed on the BBC's Andrew Marr television show today, refused to be drawn on whether his party would oppose nationalization, as it did earlier this year in the case of Northern Rock. ``We will look at it like a responsible opposition,'' he said. ``What matters most of all is safeguarding the depositors.''
Later, his finance spokesman suggested the opposition was resisting the idea of nationalization.
``People will wonder why on earth the British taxpayer is being asked by Gordon Brown to bear the full risk,'' George Osborne, the Conservative lawmaker who speaks on finance, told Sky News.
Vince Cable, treasury spokesman for the Liberal Democrats, told Sky that nationalization was the ``least worst option.''
The Tories' lead over Labour has been halved during the past month, according to an opinion poll published today. The BPIX Ltd. survey for the London-based Sunday Telegraph newspaper gives the Conservatives a 12-point lead over Labour, down from a 23 percent advantage in August.
Housing Slump
Bradford & Bingley has been hurt by the worst British housing slump in 30 years, with house prices falling for a 10th month in August. U.K. mortgage approvals fell to the lowest level in at least a decade last month, according to the British Bankers' Association.
The sliding housing market has pushed up Bradford & Bingley's late mortgage payments to more than 2 percent of all loans. That compares with the U.K. average of 0.5 percent, according to the Council of Mortgage Lenders.
The lender was formed in 1964 as a result of the merger of the Bradford Equitable Building Society and the Bingley Building Society, both of which were established in 1851. It first sold shares on the London Stock Exchange in December 2000.
Bradford & Bingley, worth 3.2 billion pounds in March 2006, closed at 20 pence on Sept. 26 in London trading, valuing the bank at 256 million pounds. That's less than half the price it asked shareholder to pay for the 828 million shares it sold at 55 pence apiece in an August rights offering that was snubbed by almost three quarters of its investors.
The U.K. government took control of Newcastle-based lender Northern Rock after it was bailed out by the central bank last September. HBOS agreed to be bought by Lloyds TSB Group Plc for 11 billion pounds on Sept. 17, assisted by a government waiver of competition rules.
In the U.S., officials seized Washington Mutual Inc., the country's biggest failed bank, and sold its assets and branches on Sept. 26 to New York-based JPMorgan Chase & Co.
To contact the reporters on this story: Jon Menon in London at jmenon1@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net
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Sunday, September 28, 2008
Toyota Reduces Vehicle Production in China on Slowing Demand
By Tetsuya Komatsu and Makiko Kitamura
Sept. 28 (Bloomberg) -- Toyota Motor Corp., Japan's biggest carmaker, is cutting production in China as sales slow.
The carmaker is reducing daily output in China, Toyota spokesman Hideaki Homma said today by phone, declining to detail the scale of the reduction or name the models affected.
The carmaker will reduce output of passenger cars by about 10 percent at its factory in Guangdong province, the Nikkei newspaper reported earlier today, without saying where it obtained the information. Toyota will slow the pace of production for at least a few months, the newspaper said.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years.
Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Toyota has a sales target of 700,000 units in China in 2008, which hasn't been revised, Homma said.
To contact the reporter on this story: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net;
Read more...
Sept. 28 (Bloomberg) -- Toyota Motor Corp., Japan's biggest carmaker, is cutting production in China as sales slow.
The carmaker is reducing daily output in China, Toyota spokesman Hideaki Homma said today by phone, declining to detail the scale of the reduction or name the models affected.
The carmaker will reduce output of passenger cars by about 10 percent at its factory in Guangdong province, the Nikkei newspaper reported earlier today, without saying where it obtained the information. Toyota will slow the pace of production for at least a few months, the newspaper said.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years.
Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Toyota has a sales target of 700,000 units in China in 2008, which hasn't been revised, Homma said.
To contact the reporter on this story: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net;
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China May Struggle to Trim Trade Surplus, Regulator Hu Says
By Wing-Gar Cheng
Sept. 28 (Bloomberg) -- China may struggle to rein in its record trade surplus because of international economic turmoil, the nation's top currency regulator said.
``There are unprecedented difficulties and challenges in promoting an international balance of payments,'' Hu Xiaolian, director of the State Administration of Foreign Exchange, said in a statement on the regulator's Web site today. China will continue to pursue foreign-exchange reforms as well as further opening its economy, she added.
China's trade surplus climbed to $28.7 billion in August as import growth weakened to 23.1 percent, the slowest pace in almost a year, on falling commodity prices. The nation wants to trim the surplus to cool gains by the yuan. A stronger currency makes Chinese goods more expensive overseas, harming exporters also facing slowing demand because of the U.S. housing market collapse.
``The current international and domestic economic situation is very complicated,'' Hu said.
To contact the reporter on this story: Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net
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Sept. 28 (Bloomberg) -- China may struggle to rein in its record trade surplus because of international economic turmoil, the nation's top currency regulator said.
``There are unprecedented difficulties and challenges in promoting an international balance of payments,'' Hu Xiaolian, director of the State Administration of Foreign Exchange, said in a statement on the regulator's Web site today. China will continue to pursue foreign-exchange reforms as well as further opening its economy, she added.
China's trade surplus climbed to $28.7 billion in August as import growth weakened to 23.1 percent, the slowest pace in almost a year, on falling commodity prices. The nation wants to trim the surplus to cool gains by the yuan. A stronger currency makes Chinese goods more expensive overseas, harming exporters also facing slowing demand because of the U.S. housing market collapse.
``The current international and domestic economic situation is very complicated,'' Hu said.
To contact the reporter on this story: Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net
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Sinosteel Says Murchison Purchase to Depend on Market Prices
By Xiao Yu
Sept. 28 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, said its decision to buy a stake in Australia's Murchison Metals Ltd. depends on ``market conditions,'' according to president Huang Tianwen.
Sinosteel this month won Australia's government approval to buy up to 49.9 percent of Perth-based Murchison. Whether to proceed to plan depends on price and the terms of the contract, Huang said today at the World Economic Forum in Tianjin.
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.
The Chinese company will consolidate Midwest first before buying other assets, Huang said today. The Beijing-based company is also seeking to buy nickel and chrome assets, Huang said, without elaborating the location.
The Chinese company had previously sought approval to buy all of Murchison. That application was withdrawn.
``We are not disappointed'' about 49.9 percent stake, Huang said. The Australian government encourages Chinese investment because the two countries complement each other in many ways, Huang said.
The company has delayed a plan to sell yuan-denominated shares because of stock market slumps, Huang said. It hasn't given up the plan, he added.
Delaying IPO
The company plans to raise between 10 billion yuan and 20 billion yuan ($2.9 billion) from the A-share market in China and complete the deal by July, the Shanghai Securities News reported on Feb. 26, citing an unidentified company official. It hired BOC International (Holdings) Ltd. and JPMorgan Chase & Co. to help manage the share sale, the report said.
China's stock market, the world's fourth-worst performer this year, has shrunk 58 percent in market value, crimping companies' ability to raise funds.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, slumped on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.
To contact the reporter on this story: Xiao Yu in Tianjin on yxiao@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, said its decision to buy a stake in Australia's Murchison Metals Ltd. depends on ``market conditions,'' according to president Huang Tianwen.
Sinosteel this month won Australia's government approval to buy up to 49.9 percent of Perth-based Murchison. Whether to proceed to plan depends on price and the terms of the contract, Huang said today at the World Economic Forum in Tianjin.
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.
The Chinese company will consolidate Midwest first before buying other assets, Huang said today. The Beijing-based company is also seeking to buy nickel and chrome assets, Huang said, without elaborating the location.
The Chinese company had previously sought approval to buy all of Murchison. That application was withdrawn.
``We are not disappointed'' about 49.9 percent stake, Huang said. The Australian government encourages Chinese investment because the two countries complement each other in many ways, Huang said.
The company has delayed a plan to sell yuan-denominated shares because of stock market slumps, Huang said. It hasn't given up the plan, he added.
Delaying IPO
The company plans to raise between 10 billion yuan and 20 billion yuan ($2.9 billion) from the A-share market in China and complete the deal by July, the Shanghai Securities News reported on Feb. 26, citing an unidentified company official. It hired BOC International (Holdings) Ltd. and JPMorgan Chase & Co. to help manage the share sale, the report said.
China's stock market, the world's fourth-worst performer this year, has shrunk 58 percent in market value, crimping companies' ability to raise funds.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, slumped on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.
To contact the reporter on this story: Xiao Yu in Tianjin on yxiao@bloomberg.net
Read more...
Canada's Harper Joins G-7 Chorus, Pins Crisis on U.S. Policies
By Theophilos Argitis
Sept. 28 (Bloomberg) -- Canadian Prime Minister Stephen Harper said U.S. policies helped create the crisis in financial markets, adding to criticism from other Group of Seven leaders and saying there's little his government can do to help.
Poor oversight, cheap credit and a tax structure that may encourage housing bubbles are among the causes of the turmoil roiling U.S. markets, Harper said in an interview with Bloomberg News. Harper, vying for re-election on Oct. 14, has framed his campaign around the notion he's the best party leader to steer Canada through economic turbulence.
``A lot of things have gone wrong here and, by the way, there were a lot of warning signs. This should not be a huge surprise,'' Harper, 49, said aboard his campaign plane. ``I certainly had expressed my concerns about some of these things to my American counterparts in the time leading up to this.''
Harper joined a growing chorus of criticism within the Group of Seven industrialized nations over the way the financial system has been managed in the world's biggest economy, highlighting the U.S.'s isolation as it seeks to stop the rout. Canada is the biggest U.S. trading partner and one of its closest G-7 allies.
French President Nicolas Sarkozy, speaking at the United Nations on Sept. 23, urged a November summit of the world's major economies to deal with the ``mad system'' that he says produced the meltdown. German Finance Minister Peer Steinbrueck used a speech this week to say the ``Anglo-Saxon'' model of banking has ``an exaggerated fixation on returns.''
New `Principles'
Sarkozy told reporters his proposed meeting should establish ``principles and new rules'' to regulate financial markets and punish those who ``jeopardize people's savings.'' Leaders should focus on excessive executive salaries that reward success without penalizing failure, he said.
U.S. allies also have refused to back Treasury Secretary Henry Paulson's $700 billion rescue plan. Earlier, Paulson had said he was confident that several nations would take steps comparable to his measure, under which the government would buy up mortgage-related securities to stem the financial crisis.
Asked whether there was anything more that Canada might be able to do to help restore stability in global markets, Harper said: ``Not that comes to mind.''
While there may be ``legislative steps'' in the future to bolster regulation, Harper said Canada already has stronger rules than the U.S. and the country's financial institutions are well-capitalized compared with their international peers.
Stronger Oversight
``Far more preferable to properly regulate and manage the system then to have to step in later,'' Harper said. Stronger oversight in Canada means ``right now, we're avoiding having to go in and be the underwriter of private financial industries.''
Harper said one factor behind the U.S. crisis is ``over- deregulation'' and regulators that often are grasping to play ``catch-up'' with increasingly complex financial instruments. There is also an ``inherent bias'' in the U.S. tax code that gives homeowners incentive to take on too much debt, he said.
``Some of it may be regulation, some of it may be, and this would be something not popular to say if I were an American politician, mortgage interest deductibility,'' Harper said. ``There is an inherent bias in the tax code for people over-leveraging.''
He also cited ``mismanagement'' of housing lenders Freddie Mac and Fannie Mae, which were taken over by the government earlier this month, and indications the Federal Reserve may have kept borrowing costs too low.
``Interest rates had gone down too far'' in the U.S., Harper said.
Bank of Canada
The Bank of Canada's reluctance to tame the country's currency by cutting interest rates may have helped Canada avoid being in a similar position, Harper said. The gap between Canadian and U.S. benchmark interest rates widened to the most since June 2004 earlier this year, keeping Canada's currency close to parity with the U.S. dollar which hurt exports.
``I think the Bank of Canada deserves to be complimented,'' Harper said. ``Some of us were skeptical at the time about, you know, that we were allowing the differential to widen and seeing the dollar going up.''
The U.S. now has few options but to bail out investors, Harper said, adding he's optimistic Paulson's plan will help.
``The first objective right now is stability of the financial system, Harper said. ``In that sense, their options are limited.''
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Canadian Prime Minister Stephen Harper said U.S. policies helped create the crisis in financial markets, adding to criticism from other Group of Seven leaders and saying there's little his government can do to help.
Poor oversight, cheap credit and a tax structure that may encourage housing bubbles are among the causes of the turmoil roiling U.S. markets, Harper said in an interview with Bloomberg News. Harper, vying for re-election on Oct. 14, has framed his campaign around the notion he's the best party leader to steer Canada through economic turbulence.
``A lot of things have gone wrong here and, by the way, there were a lot of warning signs. This should not be a huge surprise,'' Harper, 49, said aboard his campaign plane. ``I certainly had expressed my concerns about some of these things to my American counterparts in the time leading up to this.''
Harper joined a growing chorus of criticism within the Group of Seven industrialized nations over the way the financial system has been managed in the world's biggest economy, highlighting the U.S.'s isolation as it seeks to stop the rout. Canada is the biggest U.S. trading partner and one of its closest G-7 allies.
French President Nicolas Sarkozy, speaking at the United Nations on Sept. 23, urged a November summit of the world's major economies to deal with the ``mad system'' that he says produced the meltdown. German Finance Minister Peer Steinbrueck used a speech this week to say the ``Anglo-Saxon'' model of banking has ``an exaggerated fixation on returns.''
New `Principles'
Sarkozy told reporters his proposed meeting should establish ``principles and new rules'' to regulate financial markets and punish those who ``jeopardize people's savings.'' Leaders should focus on excessive executive salaries that reward success without penalizing failure, he said.
U.S. allies also have refused to back Treasury Secretary Henry Paulson's $700 billion rescue plan. Earlier, Paulson had said he was confident that several nations would take steps comparable to his measure, under which the government would buy up mortgage-related securities to stem the financial crisis.
Asked whether there was anything more that Canada might be able to do to help restore stability in global markets, Harper said: ``Not that comes to mind.''
While there may be ``legislative steps'' in the future to bolster regulation, Harper said Canada already has stronger rules than the U.S. and the country's financial institutions are well-capitalized compared with their international peers.
Stronger Oversight
``Far more preferable to properly regulate and manage the system then to have to step in later,'' Harper said. Stronger oversight in Canada means ``right now, we're avoiding having to go in and be the underwriter of private financial industries.''
Harper said one factor behind the U.S. crisis is ``over- deregulation'' and regulators that often are grasping to play ``catch-up'' with increasingly complex financial instruments. There is also an ``inherent bias'' in the U.S. tax code that gives homeowners incentive to take on too much debt, he said.
``Some of it may be regulation, some of it may be, and this would be something not popular to say if I were an American politician, mortgage interest deductibility,'' Harper said. ``There is an inherent bias in the tax code for people over-leveraging.''
He also cited ``mismanagement'' of housing lenders Freddie Mac and Fannie Mae, which were taken over by the government earlier this month, and indications the Federal Reserve may have kept borrowing costs too low.
``Interest rates had gone down too far'' in the U.S., Harper said.
Bank of Canada
The Bank of Canada's reluctance to tame the country's currency by cutting interest rates may have helped Canada avoid being in a similar position, Harper said. The gap between Canadian and U.S. benchmark interest rates widened to the most since June 2004 earlier this year, keeping Canada's currency close to parity with the U.S. dollar which hurt exports.
``I think the Bank of Canada deserves to be complimented,'' Harper said. ``Some of us were skeptical at the time about, you know, that we were allowing the differential to widen and seeing the dollar going up.''
The U.S. now has few options but to bail out investors, Harper said, adding he's optimistic Paulson's plan will help.
``The first objective right now is stability of the financial system, Harper said. ``In that sense, their options are limited.''
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
Read more...
Bank of China Says It's 'Open' to Buying Wall Street's Banks
By Zhang Dingmin
Sept. 28 (Bloomberg) -- Bank of China, the country's oldest financial institution, said it's opened to the possibility of investing in Wall Street firms, as the U.S. financial crisis takes hold and banks seek buyers and protection from bankruptcy .
``We are looking for all possible deals everywhere,'' Bank of China's Executive Vice President Zhu Min told a plenary session today at the World Economic Forum in eastern China's Tianjin, without elaborating.
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Bank of China, the country's oldest financial institution, said it's opened to the possibility of investing in Wall Street firms, as the U.S. financial crisis takes hold and banks seek buyers and protection from bankruptcy .
``We are looking for all possible deals everywhere,'' Bank of China's Executive Vice President Zhu Min told a plenary session today at the World Economic Forum in eastern China's Tianjin, without elaborating.
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
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China May Slow Pace of Currency's Gains, Hale Says
By Zhang Dingmin and Zhao Yidi
Sept. 28 (Bloomberg) -- China's central bank has indicated that it may slow the pace at which the Chinese currency is gaining against the U.S. dollar, according to David Hale, chairman of Hale Advisors.
``I had lunch with the People's Bank of China on Friday, where they told me they are going to slow down the appreciation of the currency here,'' Hale told a plenary session today at the World Economic Forum in eastern China's Tianjin city, without disclosing the identity of the official he spoke with.
The yuan has gained 17.3 percent against the U.S. dollar since the Chinese government abandoned the currency's fixed peg in 2005, and traded at 6.8485 per dollar on Sept. 26. It's risen 6.7 percent this year, the best performer of 10 Asian currencies.
Weakening export demand because of the U.S. housing slump and an international credit squeeze has stoked concern that China's GDP growth may slump, costing jobs and leading to bad loans and sinking profits. Government options to stimulate the economy and protect exporters include loosening bank lending quotas and restraining gains by the yuan.
The Chinese government ``should have slowed the yuan's appreciation from the start of 2008, because of the slower economic and export growth, and the difficulties small companies face,'' said Peng Xingyun, an economist with the Chinese Academy of Social Sciences in Beijing. ``The yuan's appreciation in the first half was too fast. It slowed down since July and that pace will likely stay through the end of the year.''
A People's Bank of China's spokesman could not be reached today to verify Hale's comment. Two telephone calls to the State Administration of Foreign Exchanges in Beijing were not answered.
What to Do?
``The global economic situation is so uncertain that they're not so sure what they should do,'' Hale said today. ``They haven't got a real decision, they're just thinking about slowing the pace down.''
China's economy grew 10.1 percent in the second quarter, the slowest pace since 2005.
China wants to maintain ``steady and relatively fast'' economic growth, the China Central Television reported on July 25, citing a meeting of the Communist Party's political bureau. That goal has been made more difficult because of challenges including global uncertainties and instabilities, it said.
China's yuan may some day become a reserve currency, a medium of exchange that other countries are willing to keep as their foreign reserves, Hale said.
``There's a clear perception that the yuan will become a reserve currency some day because of the sheer size of China's economy,'' Hale said today. ``Given the fact that China's capital account isn't convertible, we're talking about something that may happen in 20 years, not tomorrow.''
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- China's central bank has indicated that it may slow the pace at which the Chinese currency is gaining against the U.S. dollar, according to David Hale, chairman of Hale Advisors.
``I had lunch with the People's Bank of China on Friday, where they told me they are going to slow down the appreciation of the currency here,'' Hale told a plenary session today at the World Economic Forum in eastern China's Tianjin city, without disclosing the identity of the official he spoke with.
The yuan has gained 17.3 percent against the U.S. dollar since the Chinese government abandoned the currency's fixed peg in 2005, and traded at 6.8485 per dollar on Sept. 26. It's risen 6.7 percent this year, the best performer of 10 Asian currencies.
Weakening export demand because of the U.S. housing slump and an international credit squeeze has stoked concern that China's GDP growth may slump, costing jobs and leading to bad loans and sinking profits. Government options to stimulate the economy and protect exporters include loosening bank lending quotas and restraining gains by the yuan.
The Chinese government ``should have slowed the yuan's appreciation from the start of 2008, because of the slower economic and export growth, and the difficulties small companies face,'' said Peng Xingyun, an economist with the Chinese Academy of Social Sciences in Beijing. ``The yuan's appreciation in the first half was too fast. It slowed down since July and that pace will likely stay through the end of the year.''
A People's Bank of China's spokesman could not be reached today to verify Hale's comment. Two telephone calls to the State Administration of Foreign Exchanges in Beijing were not answered.
What to Do?
``The global economic situation is so uncertain that they're not so sure what they should do,'' Hale said today. ``They haven't got a real decision, they're just thinking about slowing the pace down.''
China's economy grew 10.1 percent in the second quarter, the slowest pace since 2005.
China wants to maintain ``steady and relatively fast'' economic growth, the China Central Television reported on July 25, citing a meeting of the Communist Party's political bureau. That goal has been made more difficult because of challenges including global uncertainties and instabilities, it said.
China's yuan may some day become a reserve currency, a medium of exchange that other countries are willing to keep as their foreign reserves, Hale said.
``There's a clear perception that the yuan will become a reserve currency some day because of the sheer size of China's economy,'' Hale said today. ``Given the fact that China's capital account isn't convertible, we're talking about something that may happen in 20 years, not tomorrow.''
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Intralot to Buy 21% of Melco LottVentures on Chinese Gambling
By Aaron Pan
Sept. 28 (Bloomberg) -- Intralot SA, the world's second- biggest gambling services provider, agreed to buy 21 percent of Lawrence Ho's Melco LottVentures Ltd. for HK$305 million ($39 million) because of rising lottery-ticket sales in China.
Melco LottVentures will issue new shares and convertible bonds to Athens-based Intralot, it said in a Hong Kong stock exchange statement today. The company controls a venture that runs over 500 venues for the official China Sports Lottery Administration Centre and also makes lottery-vending terminals.
The deal teams Intralot with Ho, the son of Macau gaming magnate Stanley Ho, as it looks to expand in China and the rest of Asia. Intralot will become the second-largest shareholder in Melco LottVentures, after Ho's Melco International Development Ltd., once the transaction is fully completed.
``We are confident that through this partnership, we will be more successful in the highly promising Chinese market,'' Constantinos Antonopoulos, Intralot's chief executive officer, said in an e-mailed statement.
To contact the reporter for this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Intralot SA, the world's second- biggest gambling services provider, agreed to buy 21 percent of Lawrence Ho's Melco LottVentures Ltd. for HK$305 million ($39 million) because of rising lottery-ticket sales in China.
Melco LottVentures will issue new shares and convertible bonds to Athens-based Intralot, it said in a Hong Kong stock exchange statement today. The company controls a venture that runs over 500 venues for the official China Sports Lottery Administration Centre and also makes lottery-vending terminals.
The deal teams Intralot with Ho, the son of Macau gaming magnate Stanley Ho, as it looks to expand in China and the rest of Asia. Intralot will become the second-largest shareholder in Melco LottVentures, after Ho's Melco International Development Ltd., once the transaction is fully completed.
``We are confident that through this partnership, we will be more successful in the highly promising Chinese market,'' Constantinos Antonopoulos, Intralot's chief executive officer, said in an e-mailed statement.
To contact the reporter for this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
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Airbus May Buy $1 Billion of Parts From China by 2020
By Irene Shen and Stephen Engle
Sept. 28 (Bloomberg) -- Airbus SAS, starting its first aircraft assembly today outside Europe, said it may buy up to $1 billion of components from China by 2020, as the world's most populous nation may need 3,000 planes in the next 20 years.
The world's largest aircraft maker will be able to assemble four A320s a month by 2011 in eastern China's Tianjin city. That will bolster Airbus' procurement from the country from last year's $70 million, said chief executive officer Tom Enders.
``We're already in a steep first year to increase our sourcing,'' Enders said in a television interview before opening its Tianjin A320 assembly. ``In two years, we'll triple it, double it again in three, four or five years later.''
Toulouse, France-based Airbus is making China as important as the U.S., Enders said, seeking to add sales in the world's second-largest aviation market. China may need 3,000 planes in the next 20 years as a growing economy and easier traveling rules spur airlines to expand, according to Airbus estimate.
``The daily passenger volume has increased to about 200,000 yesterday at Beijing's airport,'' said the Chinese civil aviation regulator Li Jiaxiang. ``Air travel has recovered'' after visa restrictions and excessive security checks crimped demand during last month's Beijing Olympics, he said.
Approximately one of every five orders for new plane this year may be by a Chinese airline, said Airbus Chief Commercial Officer John Leahy. Airbus is poised to sign a 280-aircraft order with Chinese airlines before the Lunar New Year in January 2009, Leahy said.
Splitting Orders
The order, comprising A320, A330 and A350 models, is pending approval by the Chinese government, and may be split into two parts, he said.
``There's a lot of continuing demand for planes in China,'' Leahy said today in Tianjin. ``I don't expect the government to approve 280 at once,'' so the first 150 planes may be announced first, he said.
Leahy declined to elaborate on the breakdown of the plane models or provide their contract value. An A320 plane, which carries up to 150 passengers, costs up to $66.5 million each according to Airbus catalogues. The A330 model, which seats between 253 and 335 passengers, costs up to $180 million each, while the A350 model, which can carry up to 300 people, has a list price of $180 million.
About 96 percent of Airbus's employment and 75 percent of its procurement is in Europe, while the company is selling the planes all over the world.
``We have to share it,'' Enders said. ``We can't keep it all in Europe or the U.S.''
Mulling A321 Assembly
Airbus in June started shipping segments to be assembled to the Tianjin plant, its first assembly line outside Europe. Delivery at the factory, about 60 miles (97 kilometers) southeast of Beijing, due to start in mid-2009, with the first delivery to Sichuan Airlines.
The assembly line is a $600 million venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone and China Aviation Industry Corp. The venture, which has agreed to assemble A319 and A320 models, is considering a plan to also make A321 models, which may require $12 million in additional investments, Airbus said.
Airbus's profitability is under pressure from the euro's strength against the U.S. dollar, which squeezes the margins between revenue from planes sold in the U.S. currency and euro- denominated production costs.
European Aeronautic, Defence & Space Co., parent of Airbus, will shift work to non-European countries as it seeks 1 billion euros ($1.46 billion) in cost-savings through 2012, two-thirds from its plane-making unit, Airbus.
Under the extended cost-saving plan, Airbus is required to save 650 million euros and other EADS units about 350 million euros, partly by moving engineering and manufacturing outside Europe.
EADS's existing Power8 program is designed to save 2.1 billion euros by 2010.
Airbus has forecast a 50 percent increase in plane output between 2007 and 2011. The company is already boosting A320 production to 40 a month by 2010 from about 37 now.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Airbus SAS, starting its first aircraft assembly today outside Europe, said it may buy up to $1 billion of components from China by 2020, as the world's most populous nation may need 3,000 planes in the next 20 years.
The world's largest aircraft maker will be able to assemble four A320s a month by 2011 in eastern China's Tianjin city. That will bolster Airbus' procurement from the country from last year's $70 million, said chief executive officer Tom Enders.
``We're already in a steep first year to increase our sourcing,'' Enders said in a television interview before opening its Tianjin A320 assembly. ``In two years, we'll triple it, double it again in three, four or five years later.''
Toulouse, France-based Airbus is making China as important as the U.S., Enders said, seeking to add sales in the world's second-largest aviation market. China may need 3,000 planes in the next 20 years as a growing economy and easier traveling rules spur airlines to expand, according to Airbus estimate.
``The daily passenger volume has increased to about 200,000 yesterday at Beijing's airport,'' said the Chinese civil aviation regulator Li Jiaxiang. ``Air travel has recovered'' after visa restrictions and excessive security checks crimped demand during last month's Beijing Olympics, he said.
Approximately one of every five orders for new plane this year may be by a Chinese airline, said Airbus Chief Commercial Officer John Leahy. Airbus is poised to sign a 280-aircraft order with Chinese airlines before the Lunar New Year in January 2009, Leahy said.
Splitting Orders
The order, comprising A320, A330 and A350 models, is pending approval by the Chinese government, and may be split into two parts, he said.
``There's a lot of continuing demand for planes in China,'' Leahy said today in Tianjin. ``I don't expect the government to approve 280 at once,'' so the first 150 planes may be announced first, he said.
Leahy declined to elaborate on the breakdown of the plane models or provide their contract value. An A320 plane, which carries up to 150 passengers, costs up to $66.5 million each according to Airbus catalogues. The A330 model, which seats between 253 and 335 passengers, costs up to $180 million each, while the A350 model, which can carry up to 300 people, has a list price of $180 million.
About 96 percent of Airbus's employment and 75 percent of its procurement is in Europe, while the company is selling the planes all over the world.
``We have to share it,'' Enders said. ``We can't keep it all in Europe or the U.S.''
Mulling A321 Assembly
Airbus in June started shipping segments to be assembled to the Tianjin plant, its first assembly line outside Europe. Delivery at the factory, about 60 miles (97 kilometers) southeast of Beijing, due to start in mid-2009, with the first delivery to Sichuan Airlines.
The assembly line is a $600 million venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone and China Aviation Industry Corp. The venture, which has agreed to assemble A319 and A320 models, is considering a plan to also make A321 models, which may require $12 million in additional investments, Airbus said.
Airbus's profitability is under pressure from the euro's strength against the U.S. dollar, which squeezes the margins between revenue from planes sold in the U.S. currency and euro- denominated production costs.
European Aeronautic, Defence & Space Co., parent of Airbus, will shift work to non-European countries as it seeks 1 billion euros ($1.46 billion) in cost-savings through 2012, two-thirds from its plane-making unit, Airbus.
Under the extended cost-saving plan, Airbus is required to save 650 million euros and other EADS units about 350 million euros, partly by moving engineering and manufacturing outside Europe.
EADS's existing Power8 program is designed to save 2.1 billion euros by 2010.
Airbus has forecast a 50 percent increase in plane output between 2007 and 2011. The company is already boosting A320 production to 40 a month by 2010 from about 37 now.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
Read more...
India's Soybean Output May Reach Record as Rains Spur Planting
By Pratik Parija
Sept. 28 (Bloomberg) -- India, Asia's biggest supplier of soybean meal, may harvest a record crop for a second year after higher prices and early rains boosted planting.
Soybean production in the year to June 30, 2009, may reach as much as 11.5 million metric tons, compared with 9.5 million tons a year earlier, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., the nation's biggest processor of the oilseed, said in an interview in Mumbai yesterday.
That compares with 9.94 million tons forecast by the government on Sept. 25 and a range of 10.5 million tons to 11.5 million ton estimated by four company executives, including Sudhakar Desai of Bunge Ltd., at a vegetable oil conference in Mumbai yesterday.
Higher output may increase exports of meal, used as an animal feed, to as much as 6 million tons in the year starting October, from 5 million tons this year, said Shahra.
Increased exports of animal feed made from soybeans to countries including Vietnam, Japan and South Korea may pose competition to suppliers from the U.S., Brazil and Argentina.
Soybean meal futures for December delivery fell 2.4 percent to $320.7 a ton on the Chicago Board of Trade on Sept. 26. The futures have dropped 28 percent from the July 3 peak of $445.70.
Farmers in the central state of Madhya Pradesh, which accounts for more than half of the nation's soybean production, planted the crop 15 to 20 days earlier than normal, the Soybean Processors Association of India, a trade body, said.
Monsoon Rains
Soybeans, which makes up about half of the nation's monsoon- sown oilseeds production, were planted in 9.56 million hectares, 9.4 percent more than a year ago, according to the farm ministry. The oilseed is planted in June and harvested starting this month.
Monsoon rains, which account for four-fifths of the nation's annual showers, were 11 percent above average in the week ended Sept. 17, according to the India Meteorological Department.
Soybeans in India may decline and trade in the range of 1,650 and 1900 rupees ($40.8) per 100 kilograms (220 pounds) by the end of this year on higher output compared with 2,150 rupees now, according to 10 company officials, including Shailesh Singh of Cargill India Pvt., surveyed at the vegetable oil conference yesterday in Mumbai.
Soybean oil in India may trade in the range of 460 and 500 rupees per 10 kilograms by Dec. 31, compared with 550 rupees now, said the company officials, including Atul Chaturvedi of Adani Enterprises.
India, which grows non-genetically modified soybeans, sells more than 70 percent of its animal feed output abroad. The meal is fed to animals as a protein booster to aid growth.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- India, Asia's biggest supplier of soybean meal, may harvest a record crop for a second year after higher prices and early rains boosted planting.
Soybean production in the year to June 30, 2009, may reach as much as 11.5 million metric tons, compared with 9.5 million tons a year earlier, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., the nation's biggest processor of the oilseed, said in an interview in Mumbai yesterday.
That compares with 9.94 million tons forecast by the government on Sept. 25 and a range of 10.5 million tons to 11.5 million ton estimated by four company executives, including Sudhakar Desai of Bunge Ltd., at a vegetable oil conference in Mumbai yesterday.
Higher output may increase exports of meal, used as an animal feed, to as much as 6 million tons in the year starting October, from 5 million tons this year, said Shahra.
Increased exports of animal feed made from soybeans to countries including Vietnam, Japan and South Korea may pose competition to suppliers from the U.S., Brazil and Argentina.
Soybean meal futures for December delivery fell 2.4 percent to $320.7 a ton on the Chicago Board of Trade on Sept. 26. The futures have dropped 28 percent from the July 3 peak of $445.70.
Farmers in the central state of Madhya Pradesh, which accounts for more than half of the nation's soybean production, planted the crop 15 to 20 days earlier than normal, the Soybean Processors Association of India, a trade body, said.
Monsoon Rains
Soybeans, which makes up about half of the nation's monsoon- sown oilseeds production, were planted in 9.56 million hectares, 9.4 percent more than a year ago, according to the farm ministry. The oilseed is planted in June and harvested starting this month.
Monsoon rains, which account for four-fifths of the nation's annual showers, were 11 percent above average in the week ended Sept. 17, according to the India Meteorological Department.
Soybeans in India may decline and trade in the range of 1,650 and 1900 rupees ($40.8) per 100 kilograms (220 pounds) by the end of this year on higher output compared with 2,150 rupees now, according to 10 company officials, including Shailesh Singh of Cargill India Pvt., surveyed at the vegetable oil conference yesterday in Mumbai.
Soybean oil in India may trade in the range of 460 and 500 rupees per 10 kilograms by Dec. 31, compared with 550 rupees now, said the company officials, including Atul Chaturvedi of Adani Enterprises.
India, which grows non-genetically modified soybeans, sells more than 70 percent of its animal feed output abroad. The meal is fed to animals as a protein booster to aid growth.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
Read more...
European Stocks Fall in Week as U.S. Stalls Bailout; Banks Drop
By Sarah Jones
Sept. 27 (Bloomberg) -- European stocks retreated for a second week as negotiations on the U.S. government's $700 billion bank rescue plan stalled, adding to the turmoil that has roiled financial markets this month.
Bradford and Bingley Plc and Natixis SA led a gauge of bank shares to its biggest drop in three months as Republicans said they wouldn't support the proposed bailout plan and as Washington Mutual Inc. was seized in the largest U.S. bank failure. Fortis plunged 35 percent on speculation the Belgian bank will struggle to raise 8.3 billion euros ($12.2 billion) to bolster capital.
``This rescue package is extremely important,'' said Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management. ``The politicians are picking at the details, but both sides recognize that something has to be done. Markets will be volatile while we wait for something to be put in place.''
The Dow Jones Stoxx 600 Index lost 4.4 percent to 265.92 this week, as 17 of 19 industry groups declined. The measure has fallen 27 percent this year as banks racked up more than $556 billion in credit losses and writedowns. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.
Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the world's largest economy unless the bailout is approved. President George W. Bush warned the U.S. will face a ``long and painful'' recession without it.
`Sharp Slowdown'
National benchmark indexes declined in 17 of the 18 western European markets. Only Iceland advanced. France's CAC 40 slipped 3.7 percent. The U.K.'s FTSE 100 retreated 4.2 percent, while Germany's DAX fell 2 percent.
``It is unavoidable that we are going into a sharp slowdown,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``I don't think this package was ever able to change what was going on in the economy. What it did do was stop us from going into financial Armageddon.''
The Dow Jones Europe Stoxx Banks Index fell 5.1 percent, the steepest weekly retreat since June.
Bradford & Bingley sank 28 percent after the U.K.'s biggest lender to landlords announced cost cuts that failed to relieve concerns about the bank's funding. Spokesman Tony McGarahan said the company is a ``strongly capitalized bank.''
Natixis, France's fourth-biggest bank, declined 17 percent as the lender sold the remaining stock issued as part of its 3.7 billion-euro ($5.4 billion) rights offer.
Vedanta Resources
Fortis slumped 35 percent this week amid speculation the company will struggle to raise the cash and may even need more funds as financial markets deteriorate. Chief Executive Officer Herman Verwilst, seeking to stem the sell-off, told reporters he was ``flabbergasted'' by the share decline.
Anglo Irish Bank Corp. Plc lost 24 percent and Bank of Ireland Plc sank 21 percent.
Vedanta Resources Plc led a slump in mining shares on concern slowing economic growth will hurt demand for metals.
India's largest copper producer dropped 22 percent as shareholders forced the company to dump reorganization plans unveiled earlier in the month. The company said ``feedback'' and market conditions prompted the U-turn.
Xstrata Plc, the world's fourth-largest diversified mining company, tumbled 18 percent as base metals declined in London. Anglo American Plc, the world's second-biggest mining company, slid 17 percent.
Arcandor
Copper fell 3.9 percent in London on speculation manufacturers and investors are pulling away from markets because of reduced lending.
Pub company Punch Taverns Plc tumbled 31 percent and rival Enterprise Inns Plc lost 23 percent as competitor Mitchells & Butlers Plc said it faces ``substantial'' cost growth, which sent the shares down 19 percent this week.
Arcandor AG, Germany's biggest department-store owner, plunged 44 percent after Boersen-Zeitung reported that regulators are probing the company and investors demanded Chief Executive Officer Thomas Middelhoff resign.
The company's travel unit, Thomas Cook Group Plc, lost 24 percent after Arcandor said it may sell stock in the tourism division as part of a loan agreement.
Holcim Ltd., the world's second-biggest cement maker, declined 24 percent as hopes of a takeover by Russian investor Eurocement Group faded.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;
Read more...
Sept. 27 (Bloomberg) -- European stocks retreated for a second week as negotiations on the U.S. government's $700 billion bank rescue plan stalled, adding to the turmoil that has roiled financial markets this month.
Bradford and Bingley Plc and Natixis SA led a gauge of bank shares to its biggest drop in three months as Republicans said they wouldn't support the proposed bailout plan and as Washington Mutual Inc. was seized in the largest U.S. bank failure. Fortis plunged 35 percent on speculation the Belgian bank will struggle to raise 8.3 billion euros ($12.2 billion) to bolster capital.
``This rescue package is extremely important,'' said Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management. ``The politicians are picking at the details, but both sides recognize that something has to be done. Markets will be volatile while we wait for something to be put in place.''
The Dow Jones Stoxx 600 Index lost 4.4 percent to 265.92 this week, as 17 of 19 industry groups declined. The measure has fallen 27 percent this year as banks racked up more than $556 billion in credit losses and writedowns. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.
Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the world's largest economy unless the bailout is approved. President George W. Bush warned the U.S. will face a ``long and painful'' recession without it.
`Sharp Slowdown'
National benchmark indexes declined in 17 of the 18 western European markets. Only Iceland advanced. France's CAC 40 slipped 3.7 percent. The U.K.'s FTSE 100 retreated 4.2 percent, while Germany's DAX fell 2 percent.
``It is unavoidable that we are going into a sharp slowdown,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``I don't think this package was ever able to change what was going on in the economy. What it did do was stop us from going into financial Armageddon.''
The Dow Jones Europe Stoxx Banks Index fell 5.1 percent, the steepest weekly retreat since June.
Bradford & Bingley sank 28 percent after the U.K.'s biggest lender to landlords announced cost cuts that failed to relieve concerns about the bank's funding. Spokesman Tony McGarahan said the company is a ``strongly capitalized bank.''
Natixis, France's fourth-biggest bank, declined 17 percent as the lender sold the remaining stock issued as part of its 3.7 billion-euro ($5.4 billion) rights offer.
Vedanta Resources
Fortis slumped 35 percent this week amid speculation the company will struggle to raise the cash and may even need more funds as financial markets deteriorate. Chief Executive Officer Herman Verwilst, seeking to stem the sell-off, told reporters he was ``flabbergasted'' by the share decline.
Anglo Irish Bank Corp. Plc lost 24 percent and Bank of Ireland Plc sank 21 percent.
Vedanta Resources Plc led a slump in mining shares on concern slowing economic growth will hurt demand for metals.
India's largest copper producer dropped 22 percent as shareholders forced the company to dump reorganization plans unveiled earlier in the month. The company said ``feedback'' and market conditions prompted the U-turn.
Xstrata Plc, the world's fourth-largest diversified mining company, tumbled 18 percent as base metals declined in London. Anglo American Plc, the world's second-biggest mining company, slid 17 percent.
Arcandor
Copper fell 3.9 percent in London on speculation manufacturers and investors are pulling away from markets because of reduced lending.
Pub company Punch Taverns Plc tumbled 31 percent and rival Enterprise Inns Plc lost 23 percent as competitor Mitchells & Butlers Plc said it faces ``substantial'' cost growth, which sent the shares down 19 percent this week.
Arcandor AG, Germany's biggest department-store owner, plunged 44 percent after Boersen-Zeitung reported that regulators are probing the company and investors demanded Chief Executive Officer Thomas Middelhoff resign.
The company's travel unit, Thomas Cook Group Plc, lost 24 percent after Arcandor said it may sell stock in the tourism division as part of a loan agreement.
Holcim Ltd., the world's second-biggest cement maker, declined 24 percent as hopes of a takeover by Russian investor Eurocement Group faded.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;
Read more...
Alitalia Pilots Agree to Government-Backed CAI Bid
By [bn:PRSN=1] Marco Bertacche [] and Steve Scherer
Sept. 27 (Bloomberg) -- Alitalia SpA, Italy's national airline, moved a step closer to averting collapse after pilots agreed to a government-backed takeover by a group of business executives.
Unions representing most of Alitalia's 2,500 pilots reached an accord with the CAI group led by Roberto Colaninno early today. The Rome-based carrier's ground staff had already approved the plan to eliminate about 3,000 jobs and impose longer hours for the same pay. Flight attendants unions said they are ``making some progress'' and will meet with CAI again on Sept. 29.
``The agreement with pilots allows us to look at coming days with great serenity,'' Transport Minister Altero Matteoli told Sky TG24 television in an interview broadcast today. ``Now we can let planes take off.''
Colaninno, chairman of scooter maker Piaggio & C. SpA, assembled a group of investors who want to merge Alitalia's flight business with domestic competitor Air One SpA to create an airline that controls more than half of the Italian market. Alitalia was losing $3 million a day when it declared insolvency on Aug. 29 to allow the state-backed rescue plan to begin.
Alitalia's bankruptcy administrator warned this week that the carrier didn't have enough cash to survive beyond this month. The airline, which flew 25 million travelers last year, risked becoming the first major European flagship carrier to collapse since Swissair Group and Belgium's Sabena in 2001.
Attendants Hold Out
There will be fewer job cuts for pilots than CAI had originally planned, said Massimo Notaro of the Unione Piloti association. The new proposal includes hiring about 140 part-time pilots and a separate contract for captains, the government said in a faxed statement.
Seven of nine Alitalia unions have now signed the agreement, with Sdl and Avia, representing most of the flight attendants, still considering the latest terms.
Prime Minister Silvio Berlusconi pledged during his election campaign in April to save Alitalia, which employs about 19,000 people. He said Sept. 18 that the carrier ``may be on the edge of the abyss'' after CAI halted negotiations when it failed to win over most of the unions.
CAI, whose investors include the Benetton family, revived its offer Sept. 25 with new concessions, such as more days off for pilots and cabin crews. Berlusconi's government also is trying to entice international airlines to join CAI, in part to help keep the unions in line.
``This agreement allows Berlusconi to fulfill his campaign promise and was possible after better conditions to pilots were offered,'' said Angelo Drusiani, who manages the equivalent of $1.9 billion of bonds at Banca Albertini Syz & C. in Milan, in a Bloomberg Television interview.
Big Names
Colaninno, former chairman of Telecom Italia SpA, has pledged along with at least 16 partners to invest about 1 billion euros ($1.46 billion) to buy Alitalia's commercial flight assets. The group includes Atlantia SpA, the toll-road company controlled by the Benetton family.
The partners intend to return Alitalia to operating profit in two years.
``It's a high-risk investment for the bidders,'' Drusiani said. ``Competition is so strong and they need a very robust industrial plan, boosting long-haul flights, if they want results.''
Fuel costs and slowing traffic growth are forcing many airlines to reduce capacity and slash jobs to bring down costs. The eight largest U.S. carriers plan to cut almost 26,000 workers starting this month as they park 465 airplanes.
Airline Failures
At least 24 airlines have filed for bankruptcy or ceased flying this year, the International Air Transportation Association said in June. Several more have folded since then, including Zoom Airlines, a trans-Atlantic carrier based in Ottawa and at London's Gatwick airport, which failed in August.
Alitalia administrator Augusto Fantozzi met Italian civil aviation authority Enac Sept. 25 and convinced the regulator to allow the carrier to continue to fly. CAI has extended its offer for Alitalia to Oct. 15, Fantozzi said, adding that the Italian airline will not ground additional flights.
Italy has been trying to sell Alitalia for more than two years. Union opposition scuppered an offer from Air France-KLM Group in April. Berlusconi also fought the Air France bid during his election campaign. Upon taking office in May he hired Intesa Sanpaolo SpA, the country's second-biggest bank, to design the rescue and find investors.
Competitor Interest
Air France, Deutsche Lufthansa AG and British Airways Plc have expressed interest in buying a stake in Alitalia, Fantozzi has said. Lufthansa has said it's monitoring the situation, and Berlusconi said last week that the German carrier would be the best partner for Alitalia. Lufthansa Chairman Wolfgang Mayrhuber was in Rome yesterday ``at the request of the Italian government,'' spokeswoman Claudia Lange said.
Lufthansa ``is interested'' in a stake in Alitalia, Luigi Angeletti, leader of the airline's third-biggest union, UIL, said after meeting the German ambassador in Rome yesterday.
Alitalia had originally been due to participate in the 2004 merger of Air France with KLM that formed Europe's biggest airline. Instead, Alitalia was excluded and told to improve its finances. It has lost almost 3 billion euros since then.
Alitalia shares were suspended in June after falling almost 45 percent since the start of the year, leaving the carrier with a market value of 617 million euros. It has one outstanding convertible bond and the government owns most of that debt. The Italian government has a 49.9 percent stake in Alitalia.
To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net; Steve Scherer in Rome at sscherer@bloomberg.net;
Read more...
Sept. 27 (Bloomberg) -- Alitalia SpA, Italy's national airline, moved a step closer to averting collapse after pilots agreed to a government-backed takeover by a group of business executives.
Unions representing most of Alitalia's 2,500 pilots reached an accord with the CAI group led by Roberto Colaninno early today. The Rome-based carrier's ground staff had already approved the plan to eliminate about 3,000 jobs and impose longer hours for the same pay. Flight attendants unions said they are ``making some progress'' and will meet with CAI again on Sept. 29.
``The agreement with pilots allows us to look at coming days with great serenity,'' Transport Minister Altero Matteoli told Sky TG24 television in an interview broadcast today. ``Now we can let planes take off.''
Colaninno, chairman of scooter maker Piaggio & C. SpA, assembled a group of investors who want to merge Alitalia's flight business with domestic competitor Air One SpA to create an airline that controls more than half of the Italian market. Alitalia was losing $3 million a day when it declared insolvency on Aug. 29 to allow the state-backed rescue plan to begin.
Alitalia's bankruptcy administrator warned this week that the carrier didn't have enough cash to survive beyond this month. The airline, which flew 25 million travelers last year, risked becoming the first major European flagship carrier to collapse since Swissair Group and Belgium's Sabena in 2001.
Attendants Hold Out
There will be fewer job cuts for pilots than CAI had originally planned, said Massimo Notaro of the Unione Piloti association. The new proposal includes hiring about 140 part-time pilots and a separate contract for captains, the government said in a faxed statement.
Seven of nine Alitalia unions have now signed the agreement, with Sdl and Avia, representing most of the flight attendants, still considering the latest terms.
Prime Minister Silvio Berlusconi pledged during his election campaign in April to save Alitalia, which employs about 19,000 people. He said Sept. 18 that the carrier ``may be on the edge of the abyss'' after CAI halted negotiations when it failed to win over most of the unions.
CAI, whose investors include the Benetton family, revived its offer Sept. 25 with new concessions, such as more days off for pilots and cabin crews. Berlusconi's government also is trying to entice international airlines to join CAI, in part to help keep the unions in line.
``This agreement allows Berlusconi to fulfill his campaign promise and was possible after better conditions to pilots were offered,'' said Angelo Drusiani, who manages the equivalent of $1.9 billion of bonds at Banca Albertini Syz & C. in Milan, in a Bloomberg Television interview.
Big Names
Colaninno, former chairman of Telecom Italia SpA, has pledged along with at least 16 partners to invest about 1 billion euros ($1.46 billion) to buy Alitalia's commercial flight assets. The group includes Atlantia SpA, the toll-road company controlled by the Benetton family.
The partners intend to return Alitalia to operating profit in two years.
``It's a high-risk investment for the bidders,'' Drusiani said. ``Competition is so strong and they need a very robust industrial plan, boosting long-haul flights, if they want results.''
Fuel costs and slowing traffic growth are forcing many airlines to reduce capacity and slash jobs to bring down costs. The eight largest U.S. carriers plan to cut almost 26,000 workers starting this month as they park 465 airplanes.
Airline Failures
At least 24 airlines have filed for bankruptcy or ceased flying this year, the International Air Transportation Association said in June. Several more have folded since then, including Zoom Airlines, a trans-Atlantic carrier based in Ottawa and at London's Gatwick airport, which failed in August.
Alitalia administrator Augusto Fantozzi met Italian civil aviation authority Enac Sept. 25 and convinced the regulator to allow the carrier to continue to fly. CAI has extended its offer for Alitalia to Oct. 15, Fantozzi said, adding that the Italian airline will not ground additional flights.
Italy has been trying to sell Alitalia for more than two years. Union opposition scuppered an offer from Air France-KLM Group in April. Berlusconi also fought the Air France bid during his election campaign. Upon taking office in May he hired Intesa Sanpaolo SpA, the country's second-biggest bank, to design the rescue and find investors.
Competitor Interest
Air France, Deutsche Lufthansa AG and British Airways Plc have expressed interest in buying a stake in Alitalia, Fantozzi has said. Lufthansa has said it's monitoring the situation, and Berlusconi said last week that the German carrier would be the best partner for Alitalia. Lufthansa Chairman Wolfgang Mayrhuber was in Rome yesterday ``at the request of the Italian government,'' spokeswoman Claudia Lange said.
Lufthansa ``is interested'' in a stake in Alitalia, Luigi Angeletti, leader of the airline's third-biggest union, UIL, said after meeting the German ambassador in Rome yesterday.
Alitalia had originally been due to participate in the 2004 merger of Air France with KLM that formed Europe's biggest airline. Instead, Alitalia was excluded and told to improve its finances. It has lost almost 3 billion euros since then.
Alitalia shares were suspended in June after falling almost 45 percent since the start of the year, leaving the carrier with a market value of 617 million euros. It has one outstanding convertible bond and the government owns most of that debt. The Italian government has a 49.9 percent stake in Alitalia.
To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net; Steve Scherer in Rome at sscherer@bloomberg.net;
Read more...
U.K. Banks Seek Government Funding Plan to Help Restart Lending
By Ben Livesey and Poppy Trowbridge
Sept. 27 (Bloomberg) -- British banks are proposing the government help bail them out of losses from the credit crunch so they can resume lending, said four people with knowledge of the discussions.
Industry executives held talks this week about different options, including the establishment of a so-called bad bank, run by the government. It would take over assets including mortgage-backed securities that declined in value with the collapse of the U.S. subprime home-loan market, said the people, who declined to be identified because the negotiations are confidential.
``The economic downturn is gathering momentum,'' George Magnus, senior economic adviser to UBS AG in London, told Bloomberg Television yesterday. ``The mortgage industry is pretty much dead. The government does have to do something.''
The push by U.K. lenders for government money comes as U.S. lawmakers consider a $700 billion rescue plan for the banking system. Prime Minister Gordon Brown backed last week's takeover of HBOS Plc by Lloyds TSB Group Plc to keep the nation's largest mortgage lender from succumbing to the global credit crisis.
Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King have indicated their opposition to using taxpayer money to support bank lending.
``A hundred billion pounds is available to help the banks get through the system,'' Darling said on Sept. 19. ``So we're dealing with the problems, we're doing it slightly differently to the Americans.''
Daily Talks
Government officials from the Treasury, central bank and Financial Services Authority are talking daily with commercial banks about how to preserve the stability of the financial system. None of those authorities would give details of the discussions.
``We're not going to comment on individual institutions,'' Michael Ellam, a spokesman for the prime minister, told reporters traveling yesterday with the U.K. leader in New York.
Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, fell to a record low in London trading yesterday on concern it won't be able to raise money in capital markets. Royal Bank of Scotland Group Plc, Britain's second-biggest bank, has been scaling back lending to shore up capital.
``There is a severe crisis'' in the money markets, said Neil MacKinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``The U.K. should take a leaf out of the U.S. book and look at a government-backed rescue.''
`Liquidity Scheme'
The so-called tripartite authorities overseeing the U.K. financial system are also considering options including an extension to the ``special liquidity scheme'' set up April 23 to spur interbank lending, according to the people involved in the matter. The emergency lending program lets banks swap mortgage securities shunned by bond investors for government bonds. The plan was due to end next month and will now run until Jan. 30.
FSA spokeswoman Kirsty Clay declined to confirm or deny reports about the plan. She also refused to comment on Bradford & Bingley, citing the regulator's policy of not talking about individual companies.
The financial crisis has triggered the biggest slump in the U.K. housing market in at least 25 years and is threatening to push the economy into recession.
To contact the reporters on this story: Ben Livesey in London blivesey@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net.
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Sept. 27 (Bloomberg) -- British banks are proposing the government help bail them out of losses from the credit crunch so they can resume lending, said four people with knowledge of the discussions.
Industry executives held talks this week about different options, including the establishment of a so-called bad bank, run by the government. It would take over assets including mortgage-backed securities that declined in value with the collapse of the U.S. subprime home-loan market, said the people, who declined to be identified because the negotiations are confidential.
``The economic downturn is gathering momentum,'' George Magnus, senior economic adviser to UBS AG in London, told Bloomberg Television yesterday. ``The mortgage industry is pretty much dead. The government does have to do something.''
The push by U.K. lenders for government money comes as U.S. lawmakers consider a $700 billion rescue plan for the banking system. Prime Minister Gordon Brown backed last week's takeover of HBOS Plc by Lloyds TSB Group Plc to keep the nation's largest mortgage lender from succumbing to the global credit crisis.
Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King have indicated their opposition to using taxpayer money to support bank lending.
``A hundred billion pounds is available to help the banks get through the system,'' Darling said on Sept. 19. ``So we're dealing with the problems, we're doing it slightly differently to the Americans.''
Daily Talks
Government officials from the Treasury, central bank and Financial Services Authority are talking daily with commercial banks about how to preserve the stability of the financial system. None of those authorities would give details of the discussions.
``We're not going to comment on individual institutions,'' Michael Ellam, a spokesman for the prime minister, told reporters traveling yesterday with the U.K. leader in New York.
Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, fell to a record low in London trading yesterday on concern it won't be able to raise money in capital markets. Royal Bank of Scotland Group Plc, Britain's second-biggest bank, has been scaling back lending to shore up capital.
``There is a severe crisis'' in the money markets, said Neil MacKinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``The U.K. should take a leaf out of the U.S. book and look at a government-backed rescue.''
`Liquidity Scheme'
The so-called tripartite authorities overseeing the U.K. financial system are also considering options including an extension to the ``special liquidity scheme'' set up April 23 to spur interbank lending, according to the people involved in the matter. The emergency lending program lets banks swap mortgage securities shunned by bond investors for government bonds. The plan was due to end next month and will now run until Jan. 30.
FSA spokeswoman Kirsty Clay declined to confirm or deny reports about the plan. She also refused to comment on Bradford & Bingley, citing the regulator's policy of not talking about individual companies.
The financial crisis has triggered the biggest slump in the U.K. housing market in at least 25 years and is threatening to push the economy into recession.
To contact the reporters on this story: Ben Livesey in London blivesey@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net.
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U.K. Officials in Talks on Bradford & Bingley Rescue
By Gonzalo Vina and Poppy Trowbridge
Sept. 27 (Bloomberg) -- The U.K. government is in talks with banking executives over a possible rescue of Bradford & Bingley Plc, the mortgage lender whose shares have tumbled 93 percent this year after late loan payments surged.
Treasury, Financial Services Authority and Bank of England officials are working ``closely'' with the company and executives of other banks, said a Treasury spokesman who asked not to be identified because of ministry policy. The options for Bradford & Bingley include a takeover by the government, acquisition by a rival bank or a break up and purchase by several buyers.
Bradford & Bingley, the U.K.'s largest lender to landlords, may join HBOS Plc and Northern Rock Plc among British banks that couldn't survive the worldwide credit crisis. In the U.S., regulators seized Washington Mutual Inc., America's biggest failed bank, this week and sold assets to J.P. Morgan Chase & Co.
``Nationalization may be more likely,'' said Guy de Blonay, a London-based fund manager at New Star Asset Management, who doesn't hold Bradford & Bingley stock. ``The government is having difficulty in finding any interest from potential buyers.''
The Treasury spokesman didn't identify the banks that are involved in the Bradford & Bingley negotiations.
Late Payments
Tony McGarahan, a Bradford & Bingley spokesman, confirmed that the lender was working with regulators ``to clarify the bank's future.''
``We can assure customers that their deposits are safe with Bradford & Bingley,'' he said, adding that a further statement will be made before financial markets re-open on Sept. 29.
Officials at Barclays Plc, Royal Bank of Scotland Group Plc and Lloyds TSB Group Plc., three of Britain's biggest banks, declined to comment on Bradford & Bingley.
The Bingley, northern England-based bank has 197 branches and almost 3,000 employees. It cut back on lending after funding from credit markets evaporated and late payments climbed.
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, and about 17 percent to customers who certify their own income on application and typically have a higher level of default than standard borrowers.
Customers are more than three months late on almost 2.3 percent of the bank's mortgages. That compares with the U.K. average of 0.5 percent, according the Council of Mortgage Lenders.
Bradford & Bingley's market value has fallen to 256 million pounds, less than the 400 million pounds the bank raised in a share sale last month that was snubbed by almost three quarters of the bank's investors.
Next Northern Rock?
Fitch Ratings Service placed the bank's mortgage-backed bonds on negative watch Sept. 24, forcing the bank to call on Barclays Plc to act as a counterparty.
U.K. officials have tried for most of the year to prevent Bradford & Bingley from becoming the next Northern Rock, which ran out of funding and triggered the first bank run in more than a century in Britain. It had about 113 billion pounds of assets before it was forced to borrow about 24 billion pounds in emergency funds from the Bank of England.
The government waived antitrust rules on Sept. 18 to allow Lloyds TSB to acquire HBOS, the nation's largest mortgage lender, in a stock swap valued at about 12 billion pounds. HBOS CEO Andy Hornby said he agreed to the rescue after the company's shares fell 76 percent and he realized that the credit crisis won't be ending any time soon.
``You can't play brinksmanship with any entity that has depositors' money,'' said Mamoun Tazi, a London-based analyst at MF Global Securities Ltd. with a ``neutral'' rating on Bradford & Bingley. ``You have to find a solution before the problem becomes unmanageable.''
To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.netPoppy Trowbridge in London at ptrowbridge@bloomberg.net; Brian Lysaght in London at blysaght@bloomberg.net
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Credit Crisis May Help China's Small-Plane Sales, Embraer Says
By Irene Shen
Sept. 27 (Bloomberg) -- Empresa Brasileira de Aeronautica SA, the world's fourth-largest aircraft maker, said the global credit crunch is an opportunity to sell smaller planes, as airlines seek to reduce fuel cost without cutting services.
Embraer, as the aircraft maker is called, may triple 2008 sales, said its China Managing Director Guan Dongyuan. The company has delivered 41 planes to Chinese customers in eight years, with a contract backlog that will last until 2013, he said.
``Planes with 30 to 120 seats are more flexible than bigger ones at this difficult time,'' Guan said in an interview in Tianjin today. ``We'll keep stable growth in China in the coming a few years.''
Chinese airlines including China Southern Airlines Co. have been cutting services, using smaller aircraft and merging flights to cope with surging fuel costs. Jet fuel, the single-biggest expense for Chinese carriers, has climbed more than 30 percent in the past year, eroding airlines' earnings.
China's aviation industry may require up to 3,000 new planes in the next 20 years, according to Airbus SAS Chief Executive Officer Tom Enders, as the country becomes more affluent and travel restrictions are eased to let more citizens travel abroad.
About 11 percent of China's airline fleets comprise regional jets that carry between 30 passengers and up to 120 people each. That's a lower proportion compared with 42 percent in the U.S. and 33 percent in Europe, underscoring the potential market in the world's most populous nation, Guan said.
The U.S. subprime crisis may crimp consumption and hurt the global economy including China, causing the Chinese growth pace to slow to between 9 percent and 9.5 percent from last year's 11.9 percent, the Chinese bank regulator today.
``We haven't seen any cancellation in orders here,'' said Guan. ``In a financial crisis like this, a smaller plane is actually a solution for carriers who want to keep their slots and flight frequency unchanged.''
Embraer sold five EMB-190 jets to China's Kun Peng Airlines for $187.5 million in July.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
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Sept. 27 (Bloomberg) -- Empresa Brasileira de Aeronautica SA, the world's fourth-largest aircraft maker, said the global credit crunch is an opportunity to sell smaller planes, as airlines seek to reduce fuel cost without cutting services.
Embraer, as the aircraft maker is called, may triple 2008 sales, said its China Managing Director Guan Dongyuan. The company has delivered 41 planes to Chinese customers in eight years, with a contract backlog that will last until 2013, he said.
``Planes with 30 to 120 seats are more flexible than bigger ones at this difficult time,'' Guan said in an interview in Tianjin today. ``We'll keep stable growth in China in the coming a few years.''
Chinese airlines including China Southern Airlines Co. have been cutting services, using smaller aircraft and merging flights to cope with surging fuel costs. Jet fuel, the single-biggest expense for Chinese carriers, has climbed more than 30 percent in the past year, eroding airlines' earnings.
China's aviation industry may require up to 3,000 new planes in the next 20 years, according to Airbus SAS Chief Executive Officer Tom Enders, as the country becomes more affluent and travel restrictions are eased to let more citizens travel abroad.
About 11 percent of China's airline fleets comprise regional jets that carry between 30 passengers and up to 120 people each. That's a lower proportion compared with 42 percent in the U.S. and 33 percent in Europe, underscoring the potential market in the world's most populous nation, Guan said.
The U.S. subprime crisis may crimp consumption and hurt the global economy including China, causing the Chinese growth pace to slow to between 9 percent and 9.5 percent from last year's 11.9 percent, the Chinese bank regulator today.
``We haven't seen any cancellation in orders here,'' said Guan. ``In a financial crisis like this, a smaller plane is actually a solution for carriers who want to keep their slots and flight frequency unchanged.''
Embraer sold five EMB-190 jets to China's Kun Peng Airlines for $187.5 million in July.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
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Carrefour China Says Sales of Dairy Products Halved by Scandal
By John Liu
Sept. 27 (Bloomberg) -- Carrefour SA, Europe's biggest retailer, said its dairy sales in China fell by 50 percent after government tests showed chemical tainting of milk products.
Sales started to recover in the past week and may be back to normal in about a month, said Eric Legros, Carrefour's managing director for China. Dairy products account for about 1 percent of the Paris-based company's total revenue in China.
``The most important thing we need now is to be rational because without being rational you have panic and panic is no good for anyone,'' Legros said in an interview today at a regional development conference in the western city of Chongquing.
China pulled more than 7,000 metric tons of dairy products from shops after they were found to be laced with melamine, typically used to make plastics and tan leather. Twenty-two dairy producers were found to have used the chemical that has caused kidney stones in babies. Tainted milk formula killed four infants and sickened 53,000 in China.
``I think it's important that we explain to consumers that there's nothing wrong with milk,'' Legros said. ``It's only that some processors added bad stuff to the milk.''
The contaminated products were first found in baby milk powder produced by Sanlu Group, 43 percent-owned by New Zealand's Fonterra Cooperative Group.
Carrefour spokesman Chen Bo said the chain had pulled Sanlu milk powder off its shelves, Xinhua reported on Sept. 12.
The French company, which has 120 stores in China, supplies fruits from China to Europe, while it doesn't ship milk or dairy products, Legros said.
Outlet Expansion
Carrefour plans to add 20 to 25 China outlets a year within the next few years, China Knowledge reported, citing people it didn't identify.
Sales in China gained 4.6 percent in the second quarter, the company said on July 9. Growth slowed after an earthquake struck the southwestern part of the country on May 12, killing about 70,000 people.
Revenue in the country dropped as much as 20 percent between April and May after some consumers in China called for a boycott of Carrefour stores. The protest followed French President Nicolas Sarkozy's announcement he might not attend the opening ceremony of the Olympic Games in Beijing because of China's March crackdown in Tibet.
Carrefour agreed to increase its stake in a supermarket venture in southern China to 80 percent from 55 percent, Chinese partner Guangzhou Grandbuy Co. said in July.
Foreign companies in China, including Carrefour, have until Dec. 5 to sign collective labor contracts with employees, the China Daily said on Sept. 24, citing the Shenzhen Federation of Trade Unions. Pay increases must take into account price inflation, the English-language newspaper reported.
To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net
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Sept. 27 (Bloomberg) -- Carrefour SA, Europe's biggest retailer, said its dairy sales in China fell by 50 percent after government tests showed chemical tainting of milk products.
Sales started to recover in the past week and may be back to normal in about a month, said Eric Legros, Carrefour's managing director for China. Dairy products account for about 1 percent of the Paris-based company's total revenue in China.
``The most important thing we need now is to be rational because without being rational you have panic and panic is no good for anyone,'' Legros said in an interview today at a regional development conference in the western city of Chongquing.
China pulled more than 7,000 metric tons of dairy products from shops after they were found to be laced with melamine, typically used to make plastics and tan leather. Twenty-two dairy producers were found to have used the chemical that has caused kidney stones in babies. Tainted milk formula killed four infants and sickened 53,000 in China.
``I think it's important that we explain to consumers that there's nothing wrong with milk,'' Legros said. ``It's only that some processors added bad stuff to the milk.''
The contaminated products were first found in baby milk powder produced by Sanlu Group, 43 percent-owned by New Zealand's Fonterra Cooperative Group.
Carrefour spokesman Chen Bo said the chain had pulled Sanlu milk powder off its shelves, Xinhua reported on Sept. 12.
The French company, which has 120 stores in China, supplies fruits from China to Europe, while it doesn't ship milk or dairy products, Legros said.
Outlet Expansion
Carrefour plans to add 20 to 25 China outlets a year within the next few years, China Knowledge reported, citing people it didn't identify.
Sales in China gained 4.6 percent in the second quarter, the company said on July 9. Growth slowed after an earthquake struck the southwestern part of the country on May 12, killing about 70,000 people.
Revenue in the country dropped as much as 20 percent between April and May after some consumers in China called for a boycott of Carrefour stores. The protest followed French President Nicolas Sarkozy's announcement he might not attend the opening ceremony of the Olympic Games in Beijing because of China's March crackdown in Tibet.
Carrefour agreed to increase its stake in a supermarket venture in southern China to 80 percent from 55 percent, Chinese partner Guangzhou Grandbuy Co. said in July.
Foreign companies in China, including Carrefour, have until Dec. 5 to sign collective labor contracts with employees, the China Daily said on Sept. 24, citing the Shenzhen Federation of Trade Unions. Pay increases must take into account price inflation, the English-language newspaper reported.
To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net
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Buffett's Berkshire Buys Into China Battery Maker BYD
By Bei Hu
Sept. 27 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. agreed to pay HK$1.8 billion ($231 million) for a minority stake in BYD Co., China's largest maker of rechargeable batteries.
Berkshire Hathaway unit MidAmerican Energy Holdings Co. will buy 225 million BYD shares, equivalent to a stake of about 10 percent, in the Shenzhen-based manufacturer, according to a statement issued through Business Wire today.
Omaha, Nebraska-based Berkshire Hathaway is tapping into rising global demand for environmentally friendly technology. The partnership with MidAmerican would help BYD bring its electric vehicles and other environmental protection measures to the global market, Wang Chuanfu, the Chinese company's chairman, said in the statement.
``As worldwide discussions relating to global climate change and environmental respect continue, the technologies being developed by BYD will be an integral part of the future,'' MidAmerican Chairman David Sokol said in the statement.
BYD aims to start selling gasoline-electric hybrid cars in the U.S. as early as 2010, joining larger rivals such as General Motor Corp. and Toyota Motor Corp., it said in January. It also plans to roll out its first all-electric auto in China next year.
Global Crisis
The BYD investment comes as companies including the largest U.S. financial institution, court high-profile investors such as Berkshire Hathaway after the global credit crisis wiped out $8 trillion of value from world stock markets since Oct. 31, according to data compiled by Bloomberg.
Berkshire Hathaway this week bought $5 billion of perpetual preferred stock in Goldman Sachs Group Inc.
BYD last month announced first-half profit fell 7 percent as costs for raw materials such as oil surged, wiping out a 44 percent increase in sales. BYD's share price has more than halved since peaking on Oct. 31. The stock edged up 0.7 percent to HK$8.40 on Sept. 26.
BYD shares fell to a five-month low on June 30 after Hong Kong's High Court dismissed its request to halt a lawsuit filed by Foxconn International Holdings, the world's biggest contract maker of mobile phones, for allegedly stealing trade secrets.
To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net
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EU's Mandelson, Airbus's Enders See `Savior' in Sovereign Funds
By Dune Lawrence
Sept. 27 (Bloomberg) -- Sovereign wealth funds will become major sources of funding for Western companies as financial markets reel, said European Union Trade Commissioner Peter Mandelson and Airbus SAS Chief Executive Officer Tom Enders.
Companies will ``lack a lot of money for years to come'' because of the financial crisis in the U.S. and Europe and will push their governments to be more open to foreign investments, Enders said at a World Economic Forum meeting in Tianjin, China. Mandelson called for regulation to encourage the investments.
Europe's top trade official has used a four-day visit to China to add his voice to calls for the Asian nation and other fast-growing emerging economies to ``take up the slack'' in the global economy, as the U.S. government works out a $700 billion plan to bail out its banks and keep credit markets functioning,
``The sovereign wealth funds in the present context might better be termed savior wealth funds,'' Mandelson said today. ``We need to find sensible ways and a proper basis on which sovereign wealth is able to deploy and use its resources to inject much-needed liquidity into the financial system.''
Countries including China, Russia and Kuwait have set up funds to seek better returns on cash reserves by investing in equities and other assets abroad. The rising pool of money has sparked concern among some lawmakers in Europe and the U.S. that the funds may be used to gain control over strategic industries.
``You see already major companies, European, American, touring those countries that have the funds because they foresee the need for funding, and these companies will also try to persuade governments'' to be more open, Enders said. ``One of the big changes we're going to see is the acceptance of sovereign wealth funds.''
Rising Investments
Sovereign wealth funds, which own about $3 trillion in assets, may almost triple their investments in the next five years as oil and gas prices surge, State Street Corp. estimated in July. Estimates of sovereign funds' asset growth are ``conservatively'' placed at 17 percent a year, said State Street, the world's biggest money manager for institutions.
They currently make up about 2 percent of the world's stock and bond markets, S. Dhanabalan, chairman of the Singapore state- owned investment company Temasek Holdings Pte said in August.
Sovereign wealth funds including Temasek, Kuwait Investment Authority and China Investment Corp. have already helped banks replenish $200 billion of capital after losses and writedowns from the U.S. subprime meltdown.
Both Mandelson and Enders said clear regulation is necessary to smooth the way for greater acceptance of sovereign funds. Mandelson in June suggested the funds could ease political resistance to their investments by signing a code of conduct that they seek only profit, not control of industries.
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net
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Sept. 27 (Bloomberg) -- Sovereign wealth funds will become major sources of funding for Western companies as financial markets reel, said European Union Trade Commissioner Peter Mandelson and Airbus SAS Chief Executive Officer Tom Enders.
Companies will ``lack a lot of money for years to come'' because of the financial crisis in the U.S. and Europe and will push their governments to be more open to foreign investments, Enders said at a World Economic Forum meeting in Tianjin, China. Mandelson called for regulation to encourage the investments.
Europe's top trade official has used a four-day visit to China to add his voice to calls for the Asian nation and other fast-growing emerging economies to ``take up the slack'' in the global economy, as the U.S. government works out a $700 billion plan to bail out its banks and keep credit markets functioning,
``The sovereign wealth funds in the present context might better be termed savior wealth funds,'' Mandelson said today. ``We need to find sensible ways and a proper basis on which sovereign wealth is able to deploy and use its resources to inject much-needed liquidity into the financial system.''
Countries including China, Russia and Kuwait have set up funds to seek better returns on cash reserves by investing in equities and other assets abroad. The rising pool of money has sparked concern among some lawmakers in Europe and the U.S. that the funds may be used to gain control over strategic industries.
``You see already major companies, European, American, touring those countries that have the funds because they foresee the need for funding, and these companies will also try to persuade governments'' to be more open, Enders said. ``One of the big changes we're going to see is the acceptance of sovereign wealth funds.''
Rising Investments
Sovereign wealth funds, which own about $3 trillion in assets, may almost triple their investments in the next five years as oil and gas prices surge, State Street Corp. estimated in July. Estimates of sovereign funds' asset growth are ``conservatively'' placed at 17 percent a year, said State Street, the world's biggest money manager for institutions.
They currently make up about 2 percent of the world's stock and bond markets, S. Dhanabalan, chairman of the Singapore state- owned investment company Temasek Holdings Pte said in August.
Sovereign wealth funds including Temasek, Kuwait Investment Authority and China Investment Corp. have already helped banks replenish $200 billion of capital after losses and writedowns from the U.S. subprime meltdown.
Both Mandelson and Enders said clear regulation is necessary to smooth the way for greater acceptance of sovereign funds. Mandelson in June suggested the funds could ease political resistance to their investments by signing a code of conduct that they seek only profit, not control of industries.
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net
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Asian Central Banks Cut Rates to Counter Impact of U.S. Crisis
By Shamim Adam
Sept. 27 (Bloomberg) -- Asia's central banks have started to cut interest rates, judging they need to counter the effect of the U.S. financial crisis on their export-dependent economies as inflation peaks.
Taiwan cut borrowing costs on Sept. 25, joining China, Australia and New Zealand in easing the price of money this month. Inflation rates have slowed in Thailand and Sri Lanka, and policy makers in the Philippines, India and Indonesia forecast price gains will cool before the end of the year.
Lower borrowing costs may spur growth as the economies of the U.S., Europe and Japan weaken and the deepening credit crisis threatens to tip the world into a recession. Still, some analysts say the inflation fight isn't over and that loose monetary policy or a surge in oil costs may spark another bout of higher prices.
``The bias may be shifting too quickly to growth and that is not wise,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``It's too early to declare victory over inflation.''
The credit crisis led Lehman Brothers Holdings Inc. to file for bankruptcy and prompted the sale of Merrill Lynch & Co. to Bank of America Corp. this month. U.S. regulators have seized at least nine lenders since July, including Washington Mutual Inc. yesterday, the fastest pace in 15 years.
While the contagion from the turmoil isn't likely to infect Asia's banking systems, the credit crisis is hurting exports.
Fewer orders for made-in-Asia goods are cooling industrial production in China, Singapore and Taiwan among others. Bank of Korea official Kang Myung Hun, who opposed a rate increase last month, said the nation's slowing economy is more of a concern than accelerating inflation.
Growth Forecasts
Merrill Lynch & Co. this month cut its forecast for Asia's growth in 2008 and 2009. The region will expand 7.7 percent this year, and ease further to 7.3 percent in 2009. Both forecasts were reduced from previous predictions of 7.9 percent growth.
``The U.S. is deteriorating and investors are increasingly pessimistic about the European economy,'' said Tomo Kinoshita, chief economist for Asia outside Japan at Nomura Holdings Inc. in Hong Kong. ``These are major destinations for Asian exports, and the implications of slower growth cannot be ignored.''
Taiwan's central bank unexpectedly reduced interest rates 12.5 basis points to 3.5 percent on Sept. 25, saying the global financial crisis had heightened the risk of an economic slowdown.
The People's Bank of China reduced its one-year lending rate to 7.20 percent from 7.47 percent on Sept. 15 and Australia's central bank lowered borrowing costs on Sept. 2, its first reduction in seven years.
In Malaysia and Sri Lanka, central bank officials refrained from raising rates even as inflation accelerated to the highest in decades.
Philippines, Indonesia
The Philippine central bank may not need to raise interest rates further as inflation may have peaked at 12.5 percent, Economic Planning Secretary Ralph Recto said Sept. 17.
Bank Indonesia's Deputy Governor Hartadi Sarwono last month said an interest rate of 9.5 percent may be ``adequate'' to slow inflation. The central bank's key rate is at 9.25 percent now.
``They're all pretty much done with raising interest rates, and those who didn't move probably won't have to,'' says Joseph Tan, chief economist for Asia at Credit Suisse Private Banking in Singapore. ``Asia needs to cushion against further downside risks to growth and guard against the fallout in the global financial system.''
Some economists are concerned the interest-rates cuts will rekindle inflation.
`Inflation Genie'
``Put the inflation genie back in the bottle now,'' said Asian Development Bank Chief Economist Ifzal Ali. Asia needs to ``tighten monetary policy even if it requires a temporary sacrifice of growth.''
Inflation in Asia will reach 7.8 percent this year, higher than an April forecast of 5.1 percent that was already the most in a decade, the ADB said. Prices may ease to 6 percent next year, it predicts.
``Lower rates will increase domestic demand and inflation pressures will start to kick in once again, exactly what central banks were trying to avoid in the first place,'' Lambregts said. ``It's a risky move and they'll pay a price for it.''
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
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Sept. 27 (Bloomberg) -- Asia's central banks have started to cut interest rates, judging they need to counter the effect of the U.S. financial crisis on their export-dependent economies as inflation peaks.
Taiwan cut borrowing costs on Sept. 25, joining China, Australia and New Zealand in easing the price of money this month. Inflation rates have slowed in Thailand and Sri Lanka, and policy makers in the Philippines, India and Indonesia forecast price gains will cool before the end of the year.
Lower borrowing costs may spur growth as the economies of the U.S., Europe and Japan weaken and the deepening credit crisis threatens to tip the world into a recession. Still, some analysts say the inflation fight isn't over and that loose monetary policy or a surge in oil costs may spark another bout of higher prices.
``The bias may be shifting too quickly to growth and that is not wise,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``It's too early to declare victory over inflation.''
The credit crisis led Lehman Brothers Holdings Inc. to file for bankruptcy and prompted the sale of Merrill Lynch & Co. to Bank of America Corp. this month. U.S. regulators have seized at least nine lenders since July, including Washington Mutual Inc. yesterday, the fastest pace in 15 years.
While the contagion from the turmoil isn't likely to infect Asia's banking systems, the credit crisis is hurting exports.
Fewer orders for made-in-Asia goods are cooling industrial production in China, Singapore and Taiwan among others. Bank of Korea official Kang Myung Hun, who opposed a rate increase last month, said the nation's slowing economy is more of a concern than accelerating inflation.
Growth Forecasts
Merrill Lynch & Co. this month cut its forecast for Asia's growth in 2008 and 2009. The region will expand 7.7 percent this year, and ease further to 7.3 percent in 2009. Both forecasts were reduced from previous predictions of 7.9 percent growth.
``The U.S. is deteriorating and investors are increasingly pessimistic about the European economy,'' said Tomo Kinoshita, chief economist for Asia outside Japan at Nomura Holdings Inc. in Hong Kong. ``These are major destinations for Asian exports, and the implications of slower growth cannot be ignored.''
Taiwan's central bank unexpectedly reduced interest rates 12.5 basis points to 3.5 percent on Sept. 25, saying the global financial crisis had heightened the risk of an economic slowdown.
The People's Bank of China reduced its one-year lending rate to 7.20 percent from 7.47 percent on Sept. 15 and Australia's central bank lowered borrowing costs on Sept. 2, its first reduction in seven years.
In Malaysia and Sri Lanka, central bank officials refrained from raising rates even as inflation accelerated to the highest in decades.
Philippines, Indonesia
The Philippine central bank may not need to raise interest rates further as inflation may have peaked at 12.5 percent, Economic Planning Secretary Ralph Recto said Sept. 17.
Bank Indonesia's Deputy Governor Hartadi Sarwono last month said an interest rate of 9.5 percent may be ``adequate'' to slow inflation. The central bank's key rate is at 9.25 percent now.
``They're all pretty much done with raising interest rates, and those who didn't move probably won't have to,'' says Joseph Tan, chief economist for Asia at Credit Suisse Private Banking in Singapore. ``Asia needs to cushion against further downside risks to growth and guard against the fallout in the global financial system.''
Some economists are concerned the interest-rates cuts will rekindle inflation.
`Inflation Genie'
``Put the inflation genie back in the bottle now,'' said Asian Development Bank Chief Economist Ifzal Ali. Asia needs to ``tighten monetary policy even if it requires a temporary sacrifice of growth.''
Inflation in Asia will reach 7.8 percent this year, higher than an April forecast of 5.1 percent that was already the most in a decade, the ADB said. Prices may ease to 6 percent next year, it predicts.
``Lower rates will increase domestic demand and inflation pressures will start to kick in once again, exactly what central banks were trying to avoid in the first place,'' Lambregts said. ``It's a risky move and they'll pay a price for it.''
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
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China Says Global Woes May Spill Over, Growth to Slow
By Zhang Dingmin and Zhao Yidi
Sept. 27 (Bloomberg) -- The U.S. financial crisis will dent consumption and spill over to the rest of the world including China, according to bankers and government officials meeting at the World Economic Forum in eastern China's Tianjin.
``We are in the worst crisis since the Great Depression,'' said Citigroup Inc.'s Senior Vice Chairman William Rhodes. ``We are in a period of a tremendous lack of confidence'' where financial institutions require fresh funds to restore consumer trust, he said.
U.S. Treasury Secretary Henry Paulson has proposed a record $700 billion rescue package for U.S. financial institutions and the Securities and Exchange Commission banned short selling of insurance, bank and brokerage stocks. The unprecedented bailout has raised concern in China, prompting officials including bank regulator Liu Mingkang to slow the introduction of new financial products such as derivatives and futures contracts.
China's annual economic growth may slow to between 9 percent and 9.5 percent, Liu said without specifying the period, as the U.S. financial crisis may crimp consumption, affecting global growth. China's 2007 economy expanded 11.9 percent.
``The most essential task now for Chinese companies is to survive, instead of thinking about overseas acquisitions,'' said Li Rongrong, director of the State-Owned Assets Supervision and Administration Commission, which holds the government's stakes in companies. ``The major difficulty faced by state companies is a significant decline in market demand.''
Opinions Divided
Bankers, corporate executives and officials gathering in Tianjin are almost equally divided on whether central banks should use taxpayers' money to bail out failed financial institutions. Chinese regulatory officials may collaborate with U.S. officials to contain the impact of the financial crisis, Rhodes said.
The People's Bank of China is ``working closely with the U.S. Federal Reserve on a series of measures that could be taken,'' Rhodes said, citing a telephone conversation with a senior member of the Fed. He didn't elaborate.
China's bank regulator is also in ``close consultation'' with the Fed, Rhodes said without giving details.
``All countries should take proactive measures to deal'' with the financial crisis, and prevent it from spreading, Chinese Premier Wen Jiabao said today in a televised speech at the World Economic Forum in eastern China's Tianjin. ``We should strengthen our cooperation,'' he said.
``When economic and financial crisis occur, economists and entrepreneurs, people and politicians, should be confident,'' Wen said. ``At the moment, confidence is more precious than gold'' and China's ``stable and sustained growth is our most important contribution to the world economy,'' he said.
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
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Temasek Says Maybank Didn't Take Improved Offer
By Berni Moestafa and Soraya Permatasari
Sept. 27 (Bloomberg) -- Temasek Holdings Pte said it offered a S$236.4 million ($166 million) rebate to Malayan Banking Bhd. to improve the terms of an Indonesian stake sale, which wasn't accepted at yesterday's deadline for the transaction.
Temasek improved the terms for the controlling stake in PT Bank Internasional Indonesia after Malayan Banking or Maybank said the Malaysian central bank had blocked the $2.7 billion deal this week, on concern it would suffer losses as global asset prices fell. Maybank is Malaysia's biggest bank by assets.
The rebate is more than the 480 million ringgit ($140 million) deposit Maybank stands to lose by walking away from the acquisition yesterday. Temasek, which holds the stake through its unit Fullerton Financial Holdings, said it offered the rebate so Maybank would stick to the per-share price for the transaction.
``The offer was made by Fullerton in the interest of the minority investors in Indonesia'' and the rebate meant Maybank could ``proceed with its earlier commitment to make a tender offer at 510 rupiah as per the share sale agreement,'' Temasek's Fullerton said in a statement today. ``Fullerton will exercise all its rights under the share sale agreement.''
Temasek, Singapore's state-owned investment company with a $130 billion portfolio, said it will explore its options with South Korea's Kookmin Bank, which is jointly selling their controlling stake in Bank Internasional.
Central Bank's Orders
Maybank said in a statement dated Sept. 25 the Malaysian central bank ordered it to reduce the price or scrap the transaction, sparking a dispute with Indonesian authorities and a record slump in Bank Internasional's share price. Maybank's Chief Executive Officer Abdul Wahid Omar said in an e-mail today he's unable to comment at the moment, in response to a query on the status of the transaction.
Temasek said Maybank first asked for a one-month extension and a price reduction on Sept. 24, which it turned down a day later. It was informed of the objections by Bank Negara, or the central bank, on Sept. 25 at 11:32 p.m. local time, it said.
Bank Negara wanted Maybank to renegotiate the price, first offered by the Malaysian lender six months ago, after stocks tumbled amid the global credit crunch that forced Lehman Brothers Holdings Inc. into bankruptcy and prompted the sale of Merrill Lynch & Co. to Bank of America Corp. American International Group Inc. also agreed to turn over control to the U.S. government last week in exchange for a federal loan of as much as $85 billion.
Maybank's purchase price of 4.7 times book value, which was twice those of Indonesian banks at the time, was considered expensive by investors. That drove Maybank's shares 23 percent lower since the bid was first made.
`Uncertainty is High'
``Investors can buy companies at more attractive prices after valuations crashed following Lehman's bankruptcy,'' said Soni Wibowo, vice president of Jakarta-based PT Bahana TCW Investment Management, which manages about $864 million in assets. ``Global market uncertainty is high.''
Bank Negara cited the ``global financial turmoil'' when it demanded changes to the deal, according to Maybank.
Khazanah Nasional Bhd., Malaysia's sovereign wealth fund, is paying 2.5 times the book value of PT Bank Niaga and three times book for PT Bank Lippo as it buys the remaining shares of the two Indonesian banks in a proposed merger. Khazanah and its unit, like Temasek, are either selling one of the two banks they own or merging them to meet an Indonesian central bank deadline limiting ownership to just one local bank by 2010.
`Overly Estimated'
``Maybank may have overly estimated Bank Internasional's franchise value,'' Raymond Kosasih, an analyst with Deutsche Bank SA in Jakarta, said in a note to clients. ``We think that the real franchise value would have been a lot lower than our theoretical adjusted price'' of 390 rupiah a share.
Bank Internasional's shares plunged by a record 34 percent to 310 rupiah yesterday. Maybank shares were unchanged at 6.90 ringgit.
``You can't do this,'' Achmad Fuad Rahmany, chairman of Indonesia's market regulator, said in an interview in Jakarta yesterday. Renegotiating the price ``will cause losses to investors.''
A failed sale would underline the challenges in cross-border banking deals in Asia. HSBC Holdings Plc last week scrapped the purchase of Korea Exchange Bank, the second time it has abandoned attempts to buy a South Korean lender. Temasek itself was only selling Bank Internasional to meet Indonesian central bank regulations.
Malaysia's central bank has previously expressed concern that Maybank was paying too much. Bank Negara earlier blocked the transaction on concern a new Indonesian takeover rule will lead to losses at Maybank. The central bank reinstated its approval on Sept. 16 after the Indonesian regulator agreed to extend the timing for Maybank to comply with the new regulation.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Arijit Ghosh in Jakarta at aghosh@bloomberg.net
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Asian Currencies Decline, Led by Korean Won, on Risk Aversion
By Aaron Pan
Sept. 27 (Bloomberg) -- Asian currencies fell this week, led by the South Korean won and the Philippine peso, on concern investors will shun regional assets as talks on a proposal to inject $700 billion into U.S. financial markets stalled.
All 10 of the most-traded Asian currencies declined over the five days after U.S. lawmakers splintered over a proposed rescue plan to alleviate the credit squeeze. Senate Banking Committee Chairman Christopher Dodd said an agreement he reached earlier with some Republicans was later undermined by a proposal offered by House Republicans led by Representative Eric Cantor.
``Traders turned skittish as the U.S. bailout plan is not likely to be approved anytime soon,'' said Roh Sang Chil, a currency dealer at Kookmin Bank in Seoul. ``With stocks falling sharply, demand for the dollar strengthened further.''
The won declined 1.8 percent this week to 1,160.50 per dollar, according to Seoul Money Brokerage Services Ltd. The currency touched a four-year low of 1,167 on Sept. 25.
Korea's currency extended this year's decline to 19.3 percent, Asia's worst performer, as overseas investors sold more local shares than they bought for a third day this week. The Kospi index of local stocks slipped 1.7 percent yesterday, snapping a five-day gain.
The Philippine currency dropped 0.4 percent this week to 46.745 versus the dollar, according to the Bankers Association of the Philippines. It has fallen every week except one in the past two months.
`Sudden Turn'
``We've got some impact from a sudden turn of sentiment that the U.S. Congress may not have actually made some progress as markets had initially thought,'' said Vishnu Varathan, a regional economist at Forecast Singapore Pte. ``The side of the coin that Asians will look at is the risk aversion bit and that doesn't bode well for the peso.''
Malaysia's ringgit fell for a fourth day on concern export growth will slow after U.S. government reports showed new home sales and orders for durable goods declined in August and jobless claims rose. Malaysia shipped 13 percent of its exports to the U.S. in the first seven months of the year, making it the second-biggest overseas market after Singapore.
``The chances of a recession have increased and that's affecting all the key export markets for Malaysia,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``Markets are still on shaky and volatile ground.''
The ringgit dropped 0.5 percent this week to 3.4360 per dollar, according to data compiled by Bloomberg.
Taiwan Dollar
Taiwan's dollar fell for a third day yesterday, paring a weekly gain, after the central bank unexpectedly reduced interest rates Sept. 25 for the first time since 2003, saying the global financial crisis has heightened the risk of an economic slowdown.
``In the near term, we could still see some weakness in the Taiwan dollar, mainly because risk aversion remains at very elevated levels,'' said Maya Pinto, an economist at IDEAglobal in Singapore. ``But in the medium to longer term, once the U.S. financial crisis blows over, among the regional currencies we'd expect the Taiwan dollar to outperform again.''
The island's currency fell 0.2 percent to NT$32.045 yesterday, according to Taipei Forex Inc. It gained 0.4 percent this week.
Elsewhere, the Singapore dollar gained 0.6 percent this week to S$1.4273 against the U.S. currency. The Thai baht rose 0.7 percent this week to 33.95, Indonesia's rupiah fell 0.1 percent to 9,385 and Vietnam's dong rose 0.7 percent to 16,600.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.
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Asian Stocks End Week Little Changed as Bailout Optimism Fades
By Hanny Wan and Patrick Rial
Sept. 27 (Bloomberg) -- Asian stocks were little changed for the week as optimism faded that a $700 billion U.S. plan to rescue its financial system would be agreed by Congress.
China Merchants Bank Co. retreated 11 percent in Hong Kong as Republicans said they wouldn't support the rescue plan and Washington Mutual Inc. was seized in the U.S.'s biggest bank failure. Pacific Basin Shipping Ltd. tumbled 27 percent after cargo rates slumped as the global slowdown cut demand for commodities. Babcock & Brown Ltd. soared 191 percent in Sydney, boosted by a ban on short selling.
``The assumption is that the bailout will take longer than expected, which is negative,'' said Tsuyoshi Shimizu, a senior fund manager at Mizuho Asset Management Co., which oversees $26 billion. ``As with Washington Mutual, the longer it takes to pass something, the more victims we're going to see.''
The MSCI Asia Pacific Index ended the week 0.3 percent lower at 113.77. The gauge jumped 2.6 percent on Sept. 22 after the U.S. government proposed buying bank assets and Australia and Taiwan restricted short selling. The index fell the next four days as debates by U.S. lawmakers on the plan dragged on.
China Merchants, the nation's fifth-largest bank by market value, declined 11 percent to HK$20 in Hong Kong. A group of House Republicans led by Eric Cantor offered an alternative plan to one proposed by Treasury Secretary Henry Paulson that's backed by President George W. Bush and Democratic leaders.
MSCI's Asian index has dropped 28 percent this year as a U.S. housing recession sparked a credit crisis, left global financial companies with more than $520 billion in writedowns and losses, and threatened to send the global economy into a recession.
Banks Gain
Still, a measure of financial stocks gained after Warren Buffett's Berkshire Hathaway Inc. said it will buy $5 billion of Goldman, Sachs & Co. stock and Mitsubishi UFJ Financial Group Inc. said it will purchase as much as 20 percent of Morgan Stanley.
Mitsubishi UFJ, Japan's largest bank, advanced 8 percent to 931 yen. Nomura Holdings Inc., Japan's biggest securities firm, soared 12 percent to 1,468 yen after agreeing to pay less than a month's revenue for units of bankrupt Lehman Brothers Holdings Inc. in Asia and Europe.
``It's smart for Japan's financial institutions to pick up assets at cheap prices and expand overseas,'' said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $20 billion.
Babcock & Brown, a manager of infrastructure assets, jumped 191 percent to A$2.31, the biggest gain on MSCI's Asian index. Australian regulators banned short selling, with some exceptions, from Sept. 22. Babcock has blamed short sellers for sending its stock down 91 percent this year.
Shipping Lines
Pacific Basin, Hong Kong's largest dry-bulk shipping line, sank 27 percent to HK$6.20. Mitsui O.S.K. Lines Ltd., Japan's largest operator of dry-bulk ships, lost 13 percent to 946 yen.
The Baltic Dry Index, a gauge of the cost of shipping commodities, lost 7.3 percent on Sept. 25, bringing its four-day slide to 16 percent, on weaker demand for steel from Chinese construction companies.
China's CSI 300 Index jumped 8.2 percent, advancing for the first week in nine. Haitong Securities Co. and Citic Securities Co., the country's two largest brokerages, jumped after China's cabinet agreed to let investors buy shares on credit and sell borrowed stock to help develop the market, an official familiar with the plan said.
The government also appealed on Sept. 18 for state-owned companies to promote ``stable'' development of the nation's capital markets by buying back shares in publicly traded units. Haitong Securities surged 40 percent to 21.52 yuan. Citic Securities soared 38 percent to 24.76 yuan.
`Returning to Normal'
In Hong Kong, Bank of East Asia Ltd. lost 11 percent to HK$25.85 after rumors about its financial stability spurred the city's first bank run in more than a decade. The bank said yesterday operations are ``returning to normal'' after the city's Financial Secretary John Tsang called rumors were ``unfounded'' and central bank head Joseph Yam pumped liquidity into the banking system.
China Mengniu Dairy Co., the country's largest milk producer by market value, resumed trading on Sept. 23, tumbling 59 percent to HK$8.29 after the industrial chemical melamine was found in its products.
Tests showed that milk products made by companies including Mengniu Dairy, Sanlu Group Co., Inner Mongolia Yili Industrial Group Co. and Bright Dairy & Food Co. contained melamine, which is banned as a food ingredient in China.
To contact the reporters on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net
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Friday, September 26, 2008
Stocks slide on stalled bailout, WaMu collapse
NEW YORK (Reuters) - Stocks dropped at the open on Friday after congressional talks on a $700 billion financial sector bailout stalled and authorities seized the largest U.S. thrift, heightening worries about the fallout from the credit crisis.
The Dow Jones industrial average .DJI was down 126.80 points, or 1.15 percent, at 10,895.26. The Standard & Poor's 500 Index .SPX was down 18.36 points, or 1.52 percent, at 1,190.82. The Nasdaq Composite Index .IXIC was down 47.03 points, or 2.15 percent, at 2,139.54.
(Reporting by Kristina Cooke; Editing by Kenneth Barry)
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Bush says financial bailout will be passed
(Updates with quotes, background)
WASHINGTON, Sept 26 (Reuters) - President George W. Bush on Friday said that while there were disagreements on parts of the $700 billion U.S. financial bailout plan, Congress will end up passing legislation.
"There are disagreements over aspects of a rescue plan but there is no disagreement that something substantial must be done," Bush said in brief comments to reporters at the White House.
"The legislative process is sometimes not very pretty, but we are going to get a package passed," he said. "We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan."
Negotiations on the financial rescue plan were to resume Friday on Capitol Hill where the administration's proposal has met resistance from skeptical lawmakers.
In another sign that the White House was pressing hard for a deal, Vice President Dick Cheney canceled trips to New Mexico and Wyoming to "assist with the pending legislation," his spokeswoman said.
Cheney as vice president can cast a tie-breaking vote in the Senate on legislation. (Reporting by Tabassum Zakaria; Editing by Neil Stempleman)
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