Thailand Floodwaters Threaten Second Honda Factory, Inner-Bangkok Industry

By Daniel Ten Kate and Suttinee Yuvejwattana - Nov 7, 2011 1:40 PM GMT+0700

Thai officials moved to defend two Bangkok industrial parks near the main international airport from a deluge that has swamped hundreds of factories over the past month and is now coursing through the capital.

More than 100 pumps are pushing out water leaking into Bang Chan industrial zone in eastern Bangkok, according to Vice Industry Minister Suparp Kleekhajai. Nearby Lad Krabang industrial estate includes a factory operated by Honda Motor Co., which abandoned its full-year profit forecast last week after another plant was flooded.

“The situation in Bang Chan industrial estate is still manageable,” Suparp said in an interview with the TNN television network. “We can still pump out the leaked water so far.”

The renewed threat to factories may worsen the impact of floods that have prompted the central bank to slash its 2011 economic growth forecast and disrupted global supply chains. Floodwaters edged closer to Bangkok’s central business district over the weekend, reaching the northernmost station on the city’s elevated rail system.

“The overall flooding situation remains very bad,” Bangkok Governor Sukhumbhand Paribatra told reporters today. “As long as more water is flowing into Bangkok, the situation won’t be resolved.”

Estates Inundated

Floodwaters have inundated seven industrial estates with 891 factories that employed about 460,000 people, according to the Thai Industrial Estate and Strategic Partners Association. Sukhumbhand today ordered residents around Bang Chan to evacuate.

Bang Chan, 15 kilometers (9.3 miles) north of Suvarnabhumi Airport, contains 91 factories, including an ice-cream plant operated by Nestle SA. Unilever, Isuzu Motors Ltd. and Cadbury Plc are among those running 231 factories employing 48,000 workers at Lad Krabang, located 10 kilometers from the airport.

“The enormous amount of water that you see still on the satellite maps north of Bangkok has to flow in one way or the other around the city,” said Adri Verwey, a specialist with Deltares, a Netherlands-based research institute, who is advising the government. “It will move on to a considerable depth around these estates. They are very much at risk.”

Suvarnabhumi and public transport links are still operating normally. The airport’s perimeter is protected by a 3.5-meter- high dike, Airports of Thailand Pcl said last week.

Compensation for Residents

Waters more than a meter deep have moved south through Bangkok, forcing Prime Minister Yingluck Shinawatra to evacuate her flood operations command last week at Don Mueang airport, which sits on the city’s northern edge and mostly handles domestic flights. The government has ordered evacuations in more than a third of the capital’s 50 districts, mostly northern, eastern and western areas.

The Energy Ministry, where Yingluck relocated the command on Oct. 29, is now surrounded by floodwaters. PTT Pcl, Thailand’s biggest energy company with offices in the same complex, relocated its operations on Nov. 4.

Residents in flooded areas of Bangkok’s outskirts have sabotaged dikes protecting the inner city in the past few weeks to try to drain their neighborhoods of water, undermining government efforts to stem the water flow into the capital.

Victim Payments

Yingluck today promised flood victims payments of between 5,000 baht ($163) and 30,000 baht for any house that has been inundated for more than seven days. She also proposed waiving all tolls on Bangkok highways and bringing in more garbage trucks to pick up trash.

“We won’t ignore people,” she said while visiting flood victims in a northern Bangkok district. “We will try to rehabilitate and bring the situation back to normal as fast as possible.”

City officials are aiming to halt the water’s advance at the Sam Sen canal, which runs just above Victory Monument, a major traffic intersection northeast of the city center and a stop on Bangkok’s Skytrain elevated railway network, according to Jate Sopitpongstorn, a spokesman for the Bangkok Metropolitan Administration. The central business areas of Silom and lower Sukhumvit are protected by two canals where water can drain out through the Chao Phraya river, he said.

“We still have hope that the inner city central business district will not be affected at the moment,” Jate said by phone yesterday.

Forecast Slashed

The Bank of Thailand, which slashed its 2011 economic growth forecast to 2.6 percent from 4.1 percent last month, expects expansion to slow as the global economy weakens and the impact of the nation’s flood crisis increases, according to the minutes of its Oct. 19 meeting.

Rehabilitation efforts have begun in parts of Nakhon Sawan province and will start soon in Ayutthaya as flood waters recede, Yingluck said Nov. 5. The government has an initial budget of more than 100 billion baht to help rebuild damaged areas, she said, adding that Cabinet will discuss new measures to help the economy recover on Nov. 8.

The disaster worsened last month, when rainfall about 40 percent more than the annual average filled dams north of Bangkok to capacity, prompting authorities to release more than 9 billion cubic meters of water down a river basin the size of Florida. Bangkok sits at its southern tip.

Flooding this year has affected 64 of Thailand’s 77 provinces, damaging World Heritage-listed temples in Ayutthaya province, destroying 15 percent of the nation’s rice crop and flooding the homes of almost 15 percent of the country’s 67 million people, according to government data.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: John Brinsley at jbrinsley@bloomberg.net

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Yen Intervention Losing Momentum

By Allison Bennett and Candice Zachariahs - Nov 7, 2011 11:07 AM GMT+0700

Foreign-exchange traders are gearing up to test Jun Azumi’s resolve to keep intervening in currency markets to weaken the yen from its postwar high.

While Japan’s Finance Minister directed the central bank on Oct. 31 to sell what analysts estimate was about 8 trillion yen ($102 billion), sending it down as much as 4.7 percent against the dollar, the move failed to increase volatility. Traders avoid currencies with increasing price swings because they boost the odds of sudden losses.

“The yen remains one of our favorite currencies as Japan still has a strong trade surplus and benefits from the global risk aversion that we’re seeing,” said Vimal Gor, the Sydney- based head of income and fixed interest at BT Investment Management Ltd., where he oversees the equivalent of $13 billion, on Nov. 3. “Unilateral interventions in the Japanese currency have no real lasting impact. If anything we’d view this as a buying opportunity.”

Azumi, who took office in September when predecessor Yoshihiko Noda became prime minister, is under pressure to weaken the yen after traders seeking a haven from turbulence in global financial markets pushed it up as much as 21 percent between April and October against a basket of nine developed- nation peers tracked by Bloomberg’s Correlation- Weighted Currency Indexes.

Shrinking Economy

The stakes are rising for Azumi, 49, as companies from Tokyo-based automaker Honda Motor Co. to consumer electronics maker Panasonic Corp. in Osaka post lower earnings because of yen gains. Japan’s economy, the third largest after the U.S. and China, will shrink 0.5 percent this year, the Organization for Economic Cooperation and Development said Oct. 31.

Japan slipped into its third recession in a decade after a record earthquake and subsequent tsunami struck the country on March 11. Growth was further damped by energy shortages after the disaster triggered meltdowns at the Fukushima Dai-Ichi plant, causing nuclear facilities to be idled.

Azumi said last week that the government acted unilaterally against “one-sided speculative moves that don’t reflect the economic fundamentals of our economy” and that he would continue to intervene until he was “satisfied.”

“There’s a chance that, for example in my hometown, the people who are finally returning to work now that the supply chain has recovered” from the March earthquake and tsunami “will see their factories close,” Azumi said on Oct. 31. “That’s outrageous.”

‘Questioning’ Japan

Making Azumi’s job tougher is the nation’s current-account surplus, which makes the currency a haven for traders even though Japan’s interest rates are among the lowest in the world and its debt is equal to twice the size of the economy. The surplus, the broadest measure of trade, means Japan doesn’t rely on foreign capital to finance budget deficits.

Traders see little chance that Azumi will have the same success as Swiss National Bank President Philipp Hildebrand, 48, who successfully weakened the franc by pegging it eight weeks ago at 1.20 to the euro after it strengthened to 1.0075. That’s because Japan’s economy is more than 10 times bigger than Switzerland’s. The franc fell 0.8 percent to 1.2297 per euro as of 12:21 p.m. in Tokyo.

“Market participants are questioning if Japan is able, or willing, to engage in tough intervention policy,” Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, said in a Nov. 1 report to clients.

Yen Rebounds

The yen weakened 3.1 percent last week to 78.24 per dollar and traded 0.1 percent higher at 78.13 today. It rose 0.3 percent to 107.54 versus the euro after depreciating 0.6 percent last week. The Bloomberg Correlated-Weighted Index for the currency today rose 0.4 percent, halting last week’s 2.4 percent drop to 410.8175. The measure has ranged this year from a low of 371.8292 on April 11 to a high of 448.3248 on Oct. 4.

After tumbling as much as 4.7 percent to 79.53 versus the dollar on Oct. 31, the biggest intraday drop since Oct. 28, 2008, the yen halted losses the next four days as European leaders raised the prospect for the first time of the euro area splintering.

Italy Concerns

Investor concern is turning to Italy as Prime Minister Silvio Berlusconi’s majority unravels before a key parliamentary vote tomorrow, with allies pressuring him to step aside after contagion from the region’s sovereign-debt crisis pushed up borrowing costs to euro-era records.

Three-month implied volatility for dollar-yen options, which indicate the expected price changes in the exchange rate, stands at 9.8 percent, lower than the 13 percent reached in August after Japan’s last intervention, according to data compiled by Bloomberg.

The gauge is the lowest among the Group-of-10 currencies, excluding the euro-franc pair. On Sept. 5, the day before the SNB said it would buy “unlimited quantities” of currency to cap the franc at 1.20 per euro, three-month implied volatility was 20 percent. It has since fallen to 9.2 percent.

“The level of implied volatility in euro-Swiss was really high before they took the action because there was actual fear,” said Shahab Jalinoos, a senior currency strategist for UBS AG in Stamford, Connecticut said Nov. 2. “The implied volatility in dollar-yen was and is among the lowest of any pair out there, so it’s debatable that anyone was actively speculating in this pair. The level of fear is limited.”

Biggest Action

Japanese officials fought yen gains three times under Noda, spending 7.3 trillion yen only to see it appreciate 4.4 percent against nine developed-nation currencies in the past six months, according to the Bloomberg indexes.

The size of the latest intervention means it has a higher chance of success. Central bank deposits suggest the government sold about 8 trillion yen, exceeding the 4.51 trillion yen in August and the most ever for a one-time operation, based on Ministry of Finance data going back to 1991. Japan has $1.1 trillion in currency reserves, second in the world to China’s $3.2 trillion.

“Eight trillion yen is a very large amount,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd. said last week. “It may have absorbed most of the demand from exporters to sell the dollar.”

Industrial Output Falls

There’s less risk now of the yen climbing beyond 75 per dollar in the short term, according to Noriaki Muraoka, managing director at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Japan’s industrial output fell 4 percent in September from August, a sharper drop than analysts surveyed by Bloomberg News forecast. Export growth slowed to 2.4 percent from a year earlier in September from 2.8 percent in August, while retail sales also fell more than expected.

“We’ll get to the phase of yen weakness at some point in the future given Japan’s weak fundamentals,” Ayako Sera, a market strategist in Tokyo at Sumitomo Trust & Banking Co., which manages the equivalent of $326 billion, said in a Nov. 4 interview.

The yen may strengthen to 77 per dollar by year-end and stay there through the first quarter of 2012, according to median estimates compiled by Bloomberg. In August, the median fourth-quarter prediction was as weak as 85. Strategists see the currency trading at 104 to the euro in December, up from a forecast of 118.5 three months ago.

Honda, Panasonic

Exporters say they can remain profitable as long as the yen trades at 86.30 per dollar or weaker, compared with the previous year’s breakeven point at 92.90, an annual Cabinet Office survey showed on March 11. Large manufacturers raised their forecast for the yen against the dollar during the fiscal year ending March 2012, to 81.15 from an estimate of 82.59 in June, according to the BOJ’s Tankan survey released in October.

Honda said last week that second-quarter net income fell 56 percent from a year earlier because of the strong yen. Panasonic, the maker of Viera televisions, forecast its biggest annual loss in 10 years, in a statement released Oct. 31.

For all the weakness in the economy, the yen remains attractive to traders.

Cumulative inflows into yen-based fixed-income assets in the five days ended Nov. 4 were double the weekly average over the past year, according to data from Bank of New York Mellon Corp., the world’s largest custodial bank.

Real Yields

Even though bond yields in Japan are among the lowest in the world, zero inflation means investors in the nation’s benchmark 10-year notes get all of the 0.99 percent yield they offer. No other Group of Seven nation except Italy has a higher so-called real yield. In the U.S., investors are accepting a negative yield on 10-year U.S. debt of 1.81 percent after inflation.

Net longs on the yen, or the difference in the number of wagers that that it will gain versus the dollar compared with those betting on a decline, fell by more than 50 percent to 25,904 on Nov. 1 from the week prior. That’s still above the weekly average since the start of the global financial crisis in mid-2007, according to data from the Commodity Futures Trading Commission in Washington.

“The BOJ has now established a track record where it intervenes for a short period of time,” Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. said in an interview Nov. 2. “There’s not a huge appetite for the market to go with the BOJ because it’s just temporary.”

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editors responsible for this story: Rocky Swift at rswift5@bloomberg.net; Dave Liedtka at dliedtka@bloomberg.net

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Qantas Says ‘Sorry’ With Free Tickets

By Tracy Withers - Nov 7, 2011 8:32 AM GMT+0700

Qantas Airways Ltd. (QAN), Australia’s biggest carrier, offered free flights to apologize to passengers stranded when the fleet was grounded for two days last month during a dispute with labor unions.

Passengers whose journeys were disrupted by the halt are entitled to a free return economy flight within Australia or to New Zealand over a two-year period from Dec. 14, the Sydney- based airline said.

“This ticket offer is one of a range of initiatives we will be launching as a way of saying sorry,” Qantas Chief Executive Officer Alan Joyce said in a statement yesterday. “Throughout the long period of industrial activity we have been acutely aware of the impact on our customers.”

About 80,000 passengers were affected when Qantas grounded 108 aircraft worldwide on Oct. 29 for about 48 hours in an attempt to end strikes. Qantas and its engineers union resumed talks today with industrial relations regulator Fair Work Australia, Peter Somerville, general manager of the Australian Licenced Aircraft Engineers Association, said by telephone.

Fair Work ordered an end to stoppages on Oct. 31, giving the airline and its engineers, long-haul pilots and baggage handlers 21 days to reach a new contract or face binding arbitration.

The disruption cost Qantas A$68 million ($71 million), the airline has said. The offer of free flights may cost the carrier as much as A$20 million, the Sydney-based Daily Telegraph newspaper reported at the weekend.

Rewarding Loyalty

Qantas has agreed with regulators that customers will be compensated for all reasonable losses arising from the grounding, and will be contacting affected passengers, the airline said.

Joyce said Qantas regretted the inconvenience caused by the dispute and by the grounding in particular.

“Now that no more industrial action can take place and the cloud of further strike action has lifted, we are 100 percent focused on what matters to customers, getting them to their destinations, safely, on time and in comfort, and in rewarding their loyalty to Qantas,” he said.

Further announcements will be made in relation to overseas- based customers and frequent fliers, the airline said.

Qantas was unchanged at A$1.615 as of 11:08 a.m. in Sydney. The stock has gained 4.5 percent since the Oct. 29 grounding compared with a 2.2 percent decline for the benchmark S&P/ASX 200 Index.

Collapse in Bookings

Qantas’s offer is part of a bid to retain disgruntled passengers and defend its 90 percent share of the business market from rivals. Virgin Australia, the country’s second- biggest airline, carried an extra 30,000 travelers during the shutdown and that may help it win 20 percent of domestic business passengers before a 2014 goal, Chief Executive Officer John Borghetti told Bloomberg TV last week.

Brisbane-based Virgin today began sales of business class seats on most of its domestic routes to help it win corporate and government travel from Qantas.

The grounding of Qantas’s fleet was the only alternative because the labor disputes were causing a slump in sales for the airline, Joyce told an Australian Senate Committee hearing on Nov. 4. Weeks of sporadic strikes caused a “massive” collapse in corporate bookings in October, he said.

Fair Work Australia ordered an end to union actions, barred Qantas from staging a planned lock out and gave both sides 21 days to reach agreement.

Prime Minister Julia Gillard said on Oct. 31 the airline took an “extreme” approach by grounding its fleet. Australians and the tourism industry were “grossly inconvenienced by this high-handed ambush,” Assistant Treasurer Bill Shorten said a day after the grounding.

Qantas engineers and baggage handlers have staged stoppages seeking higher pay and job-security measures. Long-haul pilots have also held protests in a bid to get the same employment conditions whether they fly for Qantas’s namesake carrier or planes from its budget arm Jetstar.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net; Paul Tighe at ptighe@bloomberg.net

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Asian Stocks Decline Ahead of Greece Meeting to Decide Leadership Change

By Jonathan Burgos and Yoshiaki Nohara - Nov 7, 2011 9:21 AM GMT+0700

Asian stocks fell ahead of a meeting by Greek leaders today to decide who will head a new unity government that will help secure international financing after Prime Minister George Papandreou agreed to step down.

Westpac Banking Corp. (WBC), Australia’s second-biggest lender by market value, slipped 0.9 percent on speculation a default by Greece will threaten bank earnings. Cnooc Ltd. (883) dropped 2.6 percent after the Chinese oil explorer’s planned purchase of BP Plc’s stake in Argentine crude producer Pan American Energy LLC collapsed. Takeda Pharmaceutical Co. declined 2 percent after the Japanese drugmaker slashed its full-year profit outlook.

The MSCI Asia Pacific Index lost 0.4 percent to 119.76 as of 11:12 a.m. in Tokyo, with about three shares falling for every two that rose on the gauge. The measure sank 3.6 percent last week, the most since Sept. 23, after Greece announced plans to hold a referendum on Europe’s rescue package. Papandreou agreed to step down to allow the creation of a unity government that will help secure international aid to avert a default on its sovereign debt.

“There’s going to be some uncertainty of what the direction of the unity government is,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “It’s an opportunity to sit back and wait for clarity in terms of how governments and investors are going to approach the European situation.”

Japan’s Nikkei 225 (NKY) Stock Average fell 0.6 percent and South Korea’s Kospi Index slid 0.2 percent. Australia’s S&P/ASX 200 lost 0.3 percent. Hong Kong’s Hang Seng Index rose 0.5 percent, while China’s Shanghai Composite Index slipped 0.1 percent. Markets in India, Malaysia, Philippines and Singapore were closed for holidays.

No IMF Agreement

Futures on the Standard & Poor’s 500 Index lost 0.2 percent today, erasing gains of as much as 0.6 percent earlier. In New York, the index fell 0.6 percent on Nov. 4 as the Group of 20 nations’ failure to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis offset a drop in the U.S. unemployment rate.

The refusal of major economies to stump up money now reflected irritation with Europe’s failure to resolve its crisis and foiled investor hopes that the summit would mark a turning point. The turmoil instead flared again with Greek leaders agreeing to form a new government.

Papandreou met with Antonis Samaras, the leader of the main opposition party, and “agreed to form a new government with the aim of leading the country to elections immediately after the implementation of European Council decisions on Oct. 26,” according to an e-mailed statement from the office of President Karolos Papoulias in Athens. Papandreou has already said he won’t lead this new government, the statement said.

Meetings Today

Both sides will meet again today to decide who will be the head of the new government, with a separate meeting to discuss the timeframe and the new government’s mandate, the statement said. Papoulias also will host a meeting of all political party leaders today.

The MSCI Asia Pacific Index declined 13 percent this year through Nov. 4, compared with a 0.4 percent drop by the S&P 500 and a 13 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600.

Of the 433 companies that reported results on the Asian benchmark index since October 11, 206 missed analysts’ estimates, while 151 exceeded expectations, according to data compiled by Bloomberg.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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Fillon to Unveil Austerity Plan as France Seeks Shield From Debt Crisis

By Tara Patel - Nov 7, 2011 6:01 AM GMT+0700

Prime Minister Francois Fillon will unveil austerity measures today to keep the budget gap in check as France’s economy slows and its top credit rating comes under pressure amid Europe’s sovereign-debt crisis.

“We cannot allow France’s deficit to widen” as “that would mean our debt would have to increase and we have reached a level of indebtedness that can’t continue,” Foreign Minister Alain Juppe said in an interview on Europe1 radio yesterday. Not adapting the 2012 budget to reflect slowing growth could lead to “catastrophe.”

Fillon will announce the measures at a press conference in Paris at noon following a Cabinet meeting. President Nicolas Sarkozy has pledged to trim between 6 billion euros and 8 billion euros from the budget amid investor pressure on France to improve its finances as growth stalls. Sarkozy is seeking to shield the country from the debt crisis about six months before he faces elections.

France’s economic growth will slow to about 1 percent next year rather than the 1.75 percent previously predicted, Sarkozy said on Oct. 27. The government is aiming for a deficit of 4.5 percent of gross domestic product in 2012, 3 percent in 2013 and a balanced budget in 2016, Juppe said. “We’ll stick to this target whatever happens,” he said of next year’s goal.

Yields Rise

French borrowing costs are climbing as contagion from the debt crisis spills over into Spain and Italy, core economies of the euro region. The yield on 10-year French bonds reached 3.12 percent on Nov. 3. That pushed the yield difference, or spread, with the German securities to 133 basis points, the most since the euro was introduced in 1999, before dropping to 123 basis points the following day.

“Additional austerity measures are key, not only for the French economy and its debt dynamics, but also for national and international politics,” Thomas Costerg, European economist at Standard Chartered Bank in London, said in an e-mail. Sarkozy “cannot afford to lose the AAA rating ahead of the national election next year.”

France’s Aaa credit rating is under pressure from worsening debt metrics and the potential for additional liabilities from Europe’s sovereign crisis, Moody’s Investors Service said Oct. 17. France is among euro-area nations likely to be downgraded in a stressed economic scenario, Standard & Poor’s said Oct. 21.

France must retain its top rating, Juppe said. To do so, the nation will have to break “with the culture of deficits,” Bank of France Governor Christian Noyer told Journal du Dimanche in an interview published over the weekend.

Deficit Details

Fillon said on Nov. 5 that France’s deficit will be cut by 20 percent in 2012 from 113 billion euros ($156 billion) this year through one of the most “rigorous” budgets since World War II. The shortfall will narrow by 45 billion euros next year with half the savings coming from spending cuts and the rest by boosting revenue, including plugging tax shelters, Fillon said.

The measures will be structural, balanced and fair, Finance Minister Francois Baroin told RTL radio in an interview last night. The government’s “adapting” to the slowing global economy and doesn’t expect a recession in 2012, when “we’ll do everything to reach our growth target,” he said.

“We expect the French government to focus more on spending cuts rather than tax hikes,” Costerg said. “Risks to the government forecast of 1 percent GDP growth next year are mostly to the downside, which means more painful decisions could be taken down the road.”

Possible Moves

The austerity measures include a new rate of value-added tax for industries such as restaurants and a new levy on large companies, according to French press reports. The government won’t scrap an annual holiday, contrary to some media reports, Baroin said yesterday, adding that the issue as well as the 35- hour work week will be part of the presidential campaign.

The measures will be Fillon’s second package set since August when he announced a plan worth 12 billion euros. Sarkozy last month ruled out a “general” increase in France’s VAT, leaving the door open to raising the rate on products and services that don’t currently take the full 19.6 percent rate, such as restaurant meals.

“For most French people, the VAT isn’t a good tax because we pay it several times a day and it feels unfair,” Juppe said. “The VAT has benefits. It doesn’t tax investment and is favorable to exports, which aren’t taxed whereas imports are.”

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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Euro Erases its Gains From Early Asian Trading Versus Dollar and Yen

By Monami Yui - Nov 7, 2011 6:44 AM GMT+0700

The euro erased its gains from earlier today versus the dollar and yen.

The 17-nation currency was at $1.3797 at 8:41 a.m. in Tokyo, little changed from $1.3792 on Nov. 4 in New York, after earlier rising 0.3 percent to $1.3838. The euro bought 107.80 yen from 107.88 in New York. It climbed to as high as 108.20 yen earlier.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Jonathan Annells at jannells@bloomberg.net

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FirstRand’s Nxasana South Africa’s Best-Paid Bank Chief Executive in 2011

By Renee Bonorchis - Nov 7, 2011 7:01 AM GMT+0700

FirstRand Ltd. (FSR)’s Sizwe Nxasana was South Africa’s highest-paid bank chief executive officer after the nation’s second-largest financial-services company more than doubled its full-year profit following the sale of assets.

For fiscal year 2011, Nxasana, 54, received a total of 38 million rand ($4.8 million), which included a salary and bonus package of 15.1 million rand, a deferred bonus of 4.5 million rand and a gain from a share trust of 18.4 million rand, according to the Johannesburg-based company’s annual report, published Nov. 3. Nxasana’s share-trust payment stems from his original appointment grant, said Sam Moss, the lender’s spokeswoman, adding Nxasana was awarded another 892,066 shares in 2010, a third of which will vest next year.

Nxasana, CEO since January 2010, having joined the group in 2006, was awarded a package valued at 45 million rand last year as the company aligned his pay with that of previous CEOs. His compensation topped that of Africa’s largest bank, Standard Bank Group Ltd., which increased the pay of CEO Jacko Maree by 9.7 percent in 2010 to 6.53 million rand. Nedbank Group Ltd. (NED) raised CEO Mike Brown’s total compensation by 63 percent in 2010 to 12.46 million rand and Absa Group Ltd. (ASA) more than doubled CEO Maria Ramos’s pay and incentives to 27.5 million rand after the lender’s profit rose 19 percent. FirstRand is the first bank to report for 2011.

Asset Sales

On Sept. 13, FirstRand said it would pay a special dividend of 70 cents per share after net income rose to 20.1 billion rand in the 12 months through June, from 9.44 billion rand a year earlier. FirstRand’s first special dividend since its creation in 1998 came after the company sold its stake in insurer Outsurance Holdings Ltd. for more than 4 billion rand and spun off its Momentum Group Ltd. insurance business.

“It’s fair to say that FirstRand has performed better than the other banks, and Sizwe is very highly regarded in the industry,” Moss said.

To evaluate executive pay, the bank’s compensation committee noted in the annual report that FirstRand achieved so- called normalized earnings from continuing operations of 10.1 billion rand, an increase of 22 percent, and produced a normalized return on equity of 18.7 percent. Growth in profit after tax, risk appetite, efficiencies, customer service and the empowerment of black people were other criteria used to determine executive pay, the compensation committee wrote.

FirstRand is the fourth-best performing stock on the six- member FTSE/JSE Africa Banks Index, gaining 2.7 percent this year. Standard Bank is the worst, dropping 13 percent.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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Deutsche Telekom’s German Powerhouse Loses Steam on Cable Rivals

By Cornelius Rahn - Nov 7, 2011 6:01 AM GMT+0700

Deutsche Telekom AG (DTE)’s German sales decline may have accelerated in the past quarter as competition from wireless and cable companies intensified, making it tougher to make up for a slump in markets such as Greece and Romania.

Europe’s biggest phone company has relied on Germany, whose economy has been less vulnerable to the region’s debt crisis, to balance customer losses in eastern Europe and at T-Mobile USA. Now, even broadband and television packages used to offset shrinking phone-line sales are slowing, and Deutsche Telekom may have to cut prices to stem market-share losses, analysts say.

Third-quarter revenue in Germany probably dropped 4.9 percent to 6 billion euros ($8.3 billion) from a year earlier, according to the average estimate of seven analysts compiled by Bloomberg. That compares with a decline of 3.4 percent in the previous three months and would be the third consecutive decrease. In the second quarter, Deutsche Telekom generated 55 percent of sales from continuing operations in Germany.

“At some point that drop has to stop and they have to say ’this far and no further,’” said Heinz Steffen, an analyst at Fairesearch GmbH, who has a “reduce” rating on the stock.

Deutsche Telekom’s German unit, led by Niek Jan van Damme, has focused on cost cuts, helping it attain a record ratio of adjusted earnings before interest, taxes, depreciation and amortization to sales of 40.7 percent in the second quarter. The company plans to fold its information technology systems into one unit, people familiar with the plan said last month. That would add to a cumulative 4.2 billion-euro cost-savings plan running from 2010 through 2012.

Margins Peak

“It’s going to be very hard” for the company to raise its Ebitda margins, said Will Draper, am Espirito Santo analyst. “Only if they cut a lot of additional costs.”

Deutsche Telekom’s third-quarter adjusted Ebitda may have dropped 3.9 percent to 3.8 billion euros as sales fell 3.5 percent, excluding the U.S. business, according to analyst estimates. The company is scheduled to report earnings Nov. 10.

Deutsche Telekom has dropped 6.6 percent to 9.02 euros this year in Frankfurt trading. The 21-company Bloomberg Europe Telecommunication Services Index lost 7.4 percent.

While Germany’s economy has been more resilient than Spain, Italy and France to the region’s debt crisis, growth is starting to cool there, too. Unemployment unexpectedly rose for the first time in more than two years in October, while business confidence fell to a 16-month low. Economic growth may slow to 0.8 percent next year from 2.9 percent, a government- commissioned report showed.

Weakening Powerhouse

“Any signs that the German economic powerhouse is showing some signs of weakness” may damp consumer demand and corporate spending, said Berenberg Bank analyst Paul Marsch.

In the second quarter, Deutsche Telekom’s revenue slipped 3.3 percent, excluding the U.S. unit, led by declines in Greece, Romania and Hungary. In the U.S., it’s fighting a government lawsuit to block the proposed $39 billion sale of T-Mobile USA to AT&T Inc.

At home, Deutsche Telekom is under attack from cable operators selling combined phone, broadband and TV services.

Kabel Deutschland Holding AG (KD8), Germany’s largest cable operator, said the number of phone and Web clients climbed 21 percent in the quarter ending June 30 for a total of 1.4 million. Unitymedia, the country’s second-largest cable company that’s owned by Liberty Media Corp., posted a 57 percent increase in broadband subscribers last quarter. Deutsche Telekom had 85,000 net additions of broadband clients in Germany in the second quarter, after 130,000 a year earlier.

‘Big Problem’

“Cable is going to become a very, very big problem in Germany for Deutsche Telekom,” Espirito Santo’s Draper said.

Competition is also intense in the German mobile-phone market. Last month, for the first time, Deutsche Telekom shared a release of Apple Inc.’s popular iPhone with other providers. The company’s German mobile revenue fell 1.2 percent in the quarter ended June 30 even as data-plan sales picked up.

Royal KPN NV’s E-Plus unit, the only of the four wireless operators in Germany that has reported third quarter earnings, expanded its customer base by 11 percent to 22.1 million users.

Mobile customers at Telefonica SA (TEF)’s German division jumped 9.1 percent in the quarter ended June 30 to 17.7 million and Vodafone Group Plc (VOD) added 3.3 percent to 36 million. That compared with a 6.8 percent decline to 34.5 million customers at Deutsche Telekom, which included the automatic termination of unused prepaid cards introduced last year.

Football on Phones

To bolster sales, Deutsche Telekom is trying to counter slowing growth for its Entertain television offering.

The company aims to sell between 2.5 million and 3 million television packages by the end of 2012. It has sold 1.6 million packages by the end of 2010. The company added a net 44,000 TV customers in Germany in the second quarter, down from 75,000 a year earlier.

Deutsche Telekom’s TV product costs at least 22.95 euros per month. Kabel Deutschland’s cheapest TV package costs 18.90 euros.

The phone company has added distribution via satellite to gain customers in areas with less access to broadband lines and plans to extend the service to devices including tablet computers and mobile phones next year.

If Deutsche Telekom’s current broadband market share of 46 percent falls to 45 percent or below, the company “may signal to the market that they have to be more aggressive on prices,” said ING Financial Markets analyst Jeffrey Vonk. “Broadband market share will be crucial.”

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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KT Corp. Third-Quarter Net Income Falls 41%, Lags Behind Analyst Estimates

By Jun Yang - Nov 7, 2011 7:35 AM GMT+0700

KT Corp. (030200), South Korea’s largest phone and Internet company, reported a 41 percent decline in third- quarter profit after offering discounts for smartphone subscribers and the local currency weakened.

Third-quarter net income fell to 255.7 billion won ($230 million), from a revised 430.9 billion won a year earlier, the Seongnam, South Korea-based company said in a statement today. That lagged behind the 316.1 billion won average of 12 analysts’ estimates compiled by Bloomberg.

Revenue from mobile-phone calls fell 21 percent after KT offered tariff discounts to lure smartphone users. The carrier also had a 60 billion won foreign-exchange loss. The company’s revenue may further decline in the fourth quarter, as it began to cut phone bills in October to help the government curb inflation, analysts said.

“The impact of the tariff cut will be fully reflected from the fourth quarter, so their average revenue per user could get worse,” Kim Hong Sik, a Seoul-based analyst at NH Investment & Securities Co., said before today’s announcement.

KT shares fell 0.5 percent to 36,900 as of 9:31 a.m. in Seoul trading, while the benchmark Kospi Index declined 0.1 percent.

Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 13 percent to 516.4 billion won. Sales dropped 6.2 percent to 4.99 trillion won.

The figures released today, including for the year-earlier period, were based on the International Financial Reporting Standards that the company began to use this year.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Nikon Shares Rise to Highest Level in One Week at Open in Tokyo Trading

By Kazuyo Sawa - Nov 7, 2011 7:11 AM GMT+0700

Nikon Corp. (7731), the world’s second- largest maker of professional-grade cameras, rose to the highest level in a week in Tokyo trading.

The company jumped as much as 3.2 percent to 1,801 yen and changed hands up 2.6 percent as of 9:09 a.m. in the city.

To contact the reporter on this story: Kazuyo Sawa in Tokyo at ksawa3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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Opponents to TransCanada Pipeline Protest by the Thousands at White House

By Katarzyna Klimasinska - Nov 7, 2011 6:29 AM GMT+0700

An Academy Award nominee, a Nobel laureate and thousands of protesters encircled the White House, urging President Barack Obama to reject TransCanada Corp. (TRP)’s planned oil pipeline across the U.S.

“Yes, we can!” demonstration organizer Bill McKibben shouted today, referring to Obama’s 2008 campaign slogan. “Yes, we can stop the pipeline!” McKibben is the founder of 350.org, an organization dedicated to minimizing climate change.

Mark Ruffalo, who vied for a best supporting actor Oscar, and Jody Williams, winner of the 1997 Nobel Peace Prize, also were part of the crowd in Washington that numbered as many as 12,000 people, according to the Sierra Club, one of the environmental groups coordinating the action.

The $7 billion Keystone XL pipeline would carry crude from Alberta across Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas to Gulf Coast refineries. Pipeline opponents say extracting crude from Canada’s oil sands emits three times more carbon than conventional oil production, contributing to global warming that Obama pledged to fight.

The opponents also say a spill from the pipeline could pollute the Ogallala aquifer, which stretches underground from South Dakota to Texas and provides fresh water to 1.5 million people.

“If the pipeline has any kind of leakage, it would leak into our farmlands and into that water,” said Jessica Sobocinski, a 20-year-old student who rode 12 hours on a bus from Bloomington, Indiana, to join the protest. “And even if they were to make this really nice pipeline that wouldn’t leak, we shouldn’t be dependent on these limited resources -- we already know that oil is going to run out.”

BP Oil Spill

Sobocinski was wearing an orange vest that read “Stop the Pipeline.”

While the crowd was made up mainly of young people and environmental groups, it also included landowners from the states the pipeline would cross, and Gulf Coast residents wearing T-shirts referring to BP Plc (BP/)’s offshore oil spill last year.

Obama may not act to stop the pipeline, some said.

“I don’t think, given this economy, he will turn it down, I think he will approve it,” said Jim Lemon, 57. Lemon, who voted for Obama in 2008, said he plans to support him next year anyway.

Obama returned to the White House late in the afternoon after being away golfing most of the day.

White House Comment

The president “recognizes that there are a number of critical issues involved in this decision, including climate change and impacts on public health and natural resources,” Clark Stevens, a White House spokesman, said today in an e- mailed statement. “These issues, along with American energy security and economic factors, will be considered in the State Department’s ongoing assessment.”

The State Department has jurisdiction over the pipeline proposal because it crosses the U.S. border. The agency has said it expects to decide this year. Obama indicated on Nov. 1 that he will have the final say.

“The State Department is in charge of analyzing this because it’s a pipeline coming in from Canada,” Obama said in an interview with Omaha, Nebraska, television station KETV. “They’ll be giving me a report over the next several months.”

TransCanada has said the Keystone XL pipeline will help cut U.S. dependence on oil from Venezuela and the Middle East, and create more than 20,000 U.S. jobs through 2012.

‘Professional Activists’

Shawn Howard, a spokesman for Calgary-based TransCanada, said in a Nov. 4 e-mail that the protesters’ rhetoric “shows the desperation” of “professional activists.”

The protest is part of “an anti-oil campaign that is using our pipeline as the target,” Howard said in an interview earlier that day.

The Nebraska legislature is meeting in special session in Lincoln, the capital, to consider legislation aimed at forcing TransCanada to reroute the pipeline away from the Ogallala aquifer to protect against a spill that could threaten the water supply.

The White House was a target for anti-pipeline protesters in August. Sit-ins outside on the sidewalk led to arrests of 1,252 people, according to the Tar Sands Action website. Among them were James Hansen, the head of NASA’s Goddard Institute for Space Studies, and actress Daryl Hannah.

Department Challenged

Groups including Friends of the Earth and the New York- based Natural Resources Defense Council called last month for an investigation of what they described as State Department bias toward TransCanada during an environmental review. The State Department said Aug. 26 that the pipeline poses “no significant impacts to most resources,” provided the company complies with U.S. law and follows recommended safeguards.

The State Department has said its review process is transparent and fair to all sides. TransCanada has said it didn’t influence the department’s work.

In an Oct. 28 letter to the department’s inspector general, they said that a former State Department energy-affairs envoy offered “pre-determination coaching” that amounted to “invaluable access and support for TransCanada” and that a former campaign official for Hillary Clinton’s 2008 presidential run used “political connections to gain inordinate access.” Clinton is now Secretary of State.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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Crude Oil Climbs a Fourth Day as Greece Plans Unity Government

By Ben Sharples - Nov 7, 2011 6:39 AM GMT+0700

Oil rose for a fourth day in New York amid signs Europe will contain its debt crisis after Greece said it will form a unity government to secure financial aid and avert the collapse of its economy.

Futures climbed as much as 0.5 percent after Greek Prime Minister George Papandreou agreed to step down to allow the creation of a new government. Crude gained for a fifth week in the seven days ended Nov. 4, the longest rising streak since the period ended April 3, 2009.

Oil for December delivery increased as much as 44 cents to $94.70 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.69 at 10:37 a.m. Sydney time. The contract advanced 19 cents to $94.26 on Nov. 4, the highest since Aug. 1. Prices are 3.6 percent higher the past year.

Brent oil for December settlement gained $1.19, or 1.1 percent, to $113.16 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $18.47 to New York crude, compared with a record settlement of $27.88 on Oct. 14.

The European Union accounted for 16 percent of the world’s oil consumption in 2010, according to BP Plc’s annual Statistical Review of World Energy.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Paul Gordon in Hong Kong at pgordon6@bloomberg.net

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Euro Halts Drop After Accord on Greek Unity Government; Aussie Advances

By Candice Zachariahs and Monami Yui - Nov 7, 2011 7:07 AM GMT+0700

The euro halted a decline from last week against the dollar after Greek Prime Minister George Papandreou stepped down to allow the creation of a national unity government to secure international financing before the nation runs out of money next month.

The 17-nation currency ended a drop versus the pound after Papandreou worked to close the agreement on a new government before markets opened today. The Australian and New Zealand dollars climbed on speculation the Greek accord will boost demand for higher-yielding assets. The franc slid against the euro after the Swiss National Bank signaled it’s ready to act if the currency’s strength threatens Switzerland’s economy.

“For now it removes the risk of some sort of disorderly Greek default,” Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington, said of the reports on Greece’s government. “The news will keep currencies like the euro, Aussie and kiwi supported.”

The euro traded at $1.3794 as of 9:05 a.m. in Tokyo from $1.3792 Nov. 4 in New York, when it completed a 2.5 percent weekly slide. It dropped 0.1 percent to 107.82 yen and fetched 86.01 pence after losing 0.2 percent Nov. 4. The dollar dropped 0.1 percent to 78.15 yen.

Australia’s currency rose 0.3 percent to $1.0403, and the New Zealand dollar advanced 0.4 percent to 79.69 U.S. cents.

Franc Depreciation

Papandreou met with Antonis Samaras, the leader of the main opposition party, and “agreed to form a new government with the aim of leading the country to elections immediately after the implementation of European Council decisions on October 26,” according to an e-mailed statement from the office of President Karolos Papoulias in Athens. Papandreou has already said he won’t lead this new government, the statement said.

Both sides will gather again today to decide who will be the head of the government with a separate meeting to discuss the timeframe and the new administration’s mandate, the statement said. Papoulias will host a meeting of all party leaders as well.

The franc weakened against all of its 16 major counterparts after SNB President Philipp Hildebrand said the central bank expects Switzerland’s currency “to depreciate further.”

“Should that not be the case, it could lead to deflationary developments and weigh heavily on the economy,” Hildebrand said to the NZZ am Sonntag newspaper in an interview conducted Nov. 2 and published yesterday. “We are ready to take further measures in case economic prospects and a deflationary development should require it.”

The franc fell 0.6 percent to 1.2276 per euro and declined 0.6 percent to 88.98 centimes versus the dollar.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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U.S. Stock-Index Futures Advance as Greece Moves Closer to Securing Aid

By Rita Nazareth - Nov 7, 2011 7:03 AM GMT+0700

U.S. stock futures rose, following the first weekly drop in benchmark gauges since September, as Greek Prime Minister George Papandreou agreed to step down to allow a unity government that will secure international aid.

Standard & Poor’s 500 Index futures expiring in December advanced 0.2 percent to 1,254 as of 9:02 a.m. Tokyo time. The benchmark gauge fell 2.5 percent last week.

“So goes Greece, so goes the market,” Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees $4.1 billion, said in a telephone interview. “At least the appearance that they are trying to make progress by moving forward to fix the situation is being reflected positively. It’s just like the weather. As long as it’s sunny and nice, the market will continue to go up.”

Papandreou met with Antonis Samaras, the leader of the main opposition party, and “agreed to form a new government with the aim of leading the country to elections immediately after the implementation of European Council decisions on October 26,” according to an e-mailed statement from the office of President Karolos Papoulias in Athens. Papandreou has already said he won’t lead this new government, the statement said.

Trying to preserve international aid before the nation runs out of money next month, Papandreou raced to clinch an agreement on a new government, healing divisions to secure an aid agreement and avert the first default by a European Union nation. Lucas Papademos, former European Central Bank vice president, will head a Greek national unity government, To Vima newspaper reported without citing anyone.

Failed to Agree

Global stocks slumped on Oct. 31 and Nov. 1 after Papandreou announced his desire to hold a referendum on a European Union aid package, spurring concern the deal would unravel. After rallying two straight days, the S&P 500 dropped on Nov. 4 as the Group of 20 nations failed to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis. Stocks had rallied throughout October on optimism the crisis would ebb.

Financial shares tumbled the most in the S&P 500 last week, losing 5.4 percent, on concern about potential losses from Europe and as MF Global Holdings Ltd. filed for bankruptcy protection after making bets on European sovereign debt.

CME Group Inc. (CME) is reducing the initial margin required to back futures trades to ease the bulk transfer of accounts held by MF Global customers. The holding company for the broker- dealer run by former Goldman Sachs Group Inc. Co-Chairman Jon Corzine filed for bankruptcy protection on Oct. 31. Its broker- dealer unit, MF Global Inc., faces liquidation.

“The decision to roll back margin requirements is a positive,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said in an e-mail. “Otherwise on Monday there would have been a tremendous amount of margin calls, which could have had a serious effect on the customers and caused a good amount of selling in other markets to pay for the margin calls.”

To contact the reporter on this story: {Rita Nazareth} in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Greece Will Form National Unity Government

By Marcus Bensasson, Maria Petrakis and Natalie Weeks - Nov 7, 2011 5:41 AM GMT+0700

Greek Prime Minister George Papandreou agreed to step down to allow the creation of a national unity government that will secure international financing and avert a collapse of the country’s economy.

Papandreou met with Antonis Samaras, leader of the main opposition party, and agreed to form a government intended to lead Greece “to elections immediately after the implementation of European Council decisions on October 26,” according to an e-mailed statement yesterday from the office of President Karolos Papoulias in Athens. Papandreou already stated he won’t lead the new government, the statement said.

“A lot is already being asked of the yet-to-be-formed coalition and markets could be wary of any splits that appear, especially over the tougher decisions yet to be taken,” Thomas Costerg, an economist at Standard Chartered Bank, said in comments made before yesterday’s announcement. “Greece is still not out of the woods.”

Both sides will meet again today to decide who will be the head of the new government with a separate meeting to discuss the time frame and the government’s mandate, the statement said. Papoulias will also host talks with all political party leaders today as well.

Trying to preserve international aid before the nation runs out of money next month, Papandreou raced over the past 48 hours to clinch an agreement with the main opposition party before markets open today, healing divisions to secure an aid agreement. Samaras, 60, who previously demanded elections and balked at joining forces with Papandreou’s socialist Pasok party, said he was “determined to help” reach an agreement as long as the premier stepped down first.

Finance Ministers Meet

Finance Minister Evangelos Venizelos has said he wants a unity government agreed on before euro-area finance ministers meet in Brussels today. Lucas Papademos, former European Central Bank vice president, will head a Greek national unity government, To Vima newspaper reported, without citing anyone.

The premier’s capitulation caps a tumultuous 10 days that started with him securing a second bailout from the European Union, then roiling markets by unilaterally deciding to put the terms of that rescue to the Greek people in a vote, a plan he then dropped. Bowing to pressure from his party and the opposition, Papandreou pledged to stand aside for a government with wider support.

Dora Bakoyannis, a former foreign minister who counts on the support of another four lawmakers in parliament as part of her Democratic Alliance group, said the decision is a “positive development,” necessary to the country’s “survival” and that decisive action must now be taken to quickly form the new government.

Market Confidence

“A Greek unity government will give markets confidence,” Spyros Economides, a senior lecturer at the London School of Economics, said in telephone interview.

Papandreou, 59, met with Papoulias as pressure mounted on him to step down after he was forced to cancel the referendum that might have led to Greece being ejected from the euro. The premier won a confidence motion early on Nov. 5 after pledging to disaffected members of his ruling Pasok party that he would not stay on.

More than one EU government is teetering on the brink. Italian Prime Minister Silvio Berlusconi also faces mounting pressure to step down as 10-year borrowing costs for the region’s third-biggest economy approach the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. The premier reiterated today that he won’t resign.

Pressure on Berlusconi

“With Papandreou’s decision, the focus will perhaps shift to Italy, where Prime Minister Berlusconi is facing intense pressure, and may well follow Papandreou’s footsteps should tension increase further, ” Standard Chartered Bank’s Costerg said.

Officials from the Greek ruling party and New Democracy met to discuss details of the Oct. 26 bailout accord late in Athens, before Venizelos attends the Brussels meeting, government spokesman Elias Mosialos told reporters.

The main goal of a unity government is securing approval of the Oct. 26 agreement with international lenders, Papandreou told reporters in Athens on Nov. 5. Last month’s accord “is a prerequisite for our remaining in the euro,” he said, referring to the second financing package of 130 billion euros ($179.7 billion) agreed by EU leaders on that date.

Stocks, Euro Decline

European stocks declined for the first week in six and the euro fell the most in two months versus the dollar to $1.3792, its first weekly loss since the five days ended Oct. 7, amid the Greek turmoil and after a Group of 20 summit in Cannes, France, failed on Nov. 4 to agree on increasing resources for the IMF.

Greek two-year bond yields climbed above 100 percent for the first time, German 10-year bonds posted their biggest weekly advance on record and Italian borrowing costs surged to euro-era records after European leaders said that Greece may have to exit the euro following Papandreou’s referendum decision.

The government will need the backing of 180 lawmakers to secure approval for Greece’s second aid package. Disbursement of funds was halted after Papandreou’s call for a referendum was opposed by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Austerity Measures

Papandreou, a graduate of the London School of Economics and former foreign minister, had survived a confidence vote in June called to rally support for austerity measures demanded by international lenders in return for a continuation of a 2010 bailout, the first for an EU nation. The EU and the IMF agreed to provide 110 billion euros in May last year in return for cuts in government spending and public sector jobs.

His referendum plan triggered a suspension in assistance by EU leaders less than a week after they’d approved the second rescue package and wrote down the value of Greek debt by 50 percent.

The surprise referendum announcement triggered the biggest two-day slide in the MSCI World Index in almost three years and sent spreads on French, Greek and Italian bonds over bunds to euro-era records. France now pays 123 basis points more than Germany to borrow for 10 years.

To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net; Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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Thailand Floodwaters Threaten Bangkok Industry

By Daniel Ten Kate and Suttinee Yuvejwattana - Nov 7, 2011 12:00 AM GMT+0700

Thai floodwaters today will test barriers protecting two Bangkok industrial parks near the main international airport as a deluge that has swamped hundreds of factories over the past month courses through the capital.

A water mass north of Bangkok should reach Lat Krabang and Bang Chan industrial zones in the eastern part of the city, according to Jate Sopitpongstorn, a spokesman for the Bangkok Metropolitan Administration. The estates include a factory operated by Honda Motor Co., which abandoned its full-year profit forecast last week after another factory was flooded.

“The water will be there for sure,” Jate said by phone yesterday. “Lat Krabang has a high potential for flooding, but we hope the protection we put inside, 3 meters high, can protect and hold the water.”

The renewed threat to factories may worsen the impact of floods that have prompted the central bank to slash its 2011 economic growth forecast and disrupted global supply chains. Floodwaters edged closer to Bangkok’s central business district at the weekend, reaching the northernmost station on the city’s elevated rail system.

“The amount of water is massive,” Prime Minister Yingluck Shinawatra said after visiting a flooded district on the city’s outskirts yesterday. “It may take two to three weeks for the water to drain to the sea, so we are asking people to be patient.”

Floodwaters have already inundated seven industrial estates with 891 factories that employed about 460,000 people, according to the Thai Industrial Estate and Strategic Partners Association. Lat Krabang, 10 kilometers (6.2 miles) north of Suvarnabhumi airport, houses 231 factories employing 48,000 workers, including those operated by Unilever, Isuzu Motors Ltd. and Cadbury Plc.

Factories ‘At Risk’

“The enormous amount of water that you see still on the satellite maps north of Bangkok has to flow in one way or the other around the city,” said Adri Verwey, a specialist with Deltares, a Netherlands-based research institute, who is advising the government. “It will move on to a considerable depth around these estates. They are very much at risk.”

Suvarnabhumi and public transport links are still operating as normal. The airport’s perimeter is protected by a 3.5-meter- high dike, Airports of Thailand Pcl said last week.

The Thai capital is facing a dual threat from floodwaters from the north and angry residents intent on tearing down defensive walls, Yingluck said yesterday. The government finished the construction of a “big bag dike” consisting of large sandbags that should stem the flow of water into northern parts of the capital, she said.

Evacuations

“People still see water because we try to slow down its flow to make it drain through canals,” Yingluck said yesterday. “There are two main tasks now. First is managing water and the second is to take care of three million people who are affected.”

Waters more than a meter deep have moved south through Bangkok, forcing Yingluck last week to evacuate her flood operations command at Don Mueang airport, which sits on the city’s northern edge and mostly handles domestic flights. The government has ordered evacuations in 30 percent of the capital’s 50 districts, mostly northern, eastern and western areas.

City officials are aiming to halt the water’s advance at the Sam Sen canal, which runs just above Victory Monument, a major traffic intersection northeast of the city center and a stop on Bangkok’s elevated railway network known as the Skytrain, Jate said. The central business areas of Silom and lower Sukhumvit are protected by two canals where water can be drained out through the Chao Phraya river, he said.

‘Hope’

“We still have hope that the inner city central business district will not be affected at the moment,” Jate said.

The Bank of Thailand, which last month slashed its 2011 economic growth forecast to 2.6 percent from 4.1 percent, expects expansion to slow as the global economy weakens and the impact of the nation’s flood crisis increases, according to the minutes of its Oct. 19 meeting.

Rehabilitation efforts have begun in parts of Nakhon Sawan province and will start soon in Ayutthaya as flood waters recede, Yingluck said Nov. 5. The government has an initial budget of more than 100 billion baht ($3.3 billion) to help rebuild damaged areas, she said, adding that Cabinet will discuss new measures to help the economy recover on Nov. 8.

The disaster worsened last month, when rainfall about 40 percent more than the annual average filled dams north of Bangkok to capacity, prompting authorities to release more than 9 billion cubic meters of water down a river basin the size of Florida, with Bangkok at its southern tip.

Flooding this year has affected 64 of Thailand’s 77 provinces, damaging World Heritage-listed temples in Ayutthaya province, destroying 15 percent of the nation’s rice crop and flooding the homes of almost 15 percent of the country’s 67 million people, according to government data.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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Euro Finance Chiefs Focus on ‘Bazooka’ Fund as Political Turmoil Deepens

By Patrick Donahue - Nov 7, 2011 4:39 PM GMT+0700

Play Video

Nov. 7 (Bloomberg) -- Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, talks about the outlook for Greek politics and the nation's debt problems, and his investment strategy. Freris speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Play Video

Nov. 7 (Bloomberg) -- Yannis Tsamourgelis, assistant professor at the University of the Aegean, talks about Greece's government and debt problems. Greek Prime Minister George Papandreou agreed to step down to allow the creation of a national unity government that will secure international financing and avert a collapse of the country’s economy. Tsamourgelis speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

European finance chiefs return to Brussels today on a mission to convince global leaders that they can shield countries such as Italy and Spain from the spreading debt crisis by bulking out their bailout fund.

As political turmoil envelops governments in Athens and Rome, finance ministers from the 17-member euro area will work on the details of plans to increase the muscle of the European Financial Stability Facility. Leveraging the fund would aim to ramp up spending capacity to 1 trillion euros ($1.4 trillion).

European leaders’ failure to resolve the two-year-old debt crisis threatens to drag down the global economy and trigger another financial downturn. World leaders at a Group of 20 meeting last week demanded euro governments do more to staunch the turmoil -- including fleshing out how an expanded EFSF would work -- before they commit fresh cash to the region.

“The leveraged EFSF may still turn into a bazooka, but so far it looks more like a water pistol,” Joachim Fels, Morgan Stanley’s chief global economist in London, wrote in a note to clients yesterday. While ministers may furnish some detail on how the fund operates, “don’t hold your breath,” he wrote.

Ministers convene at 5 p.m. in Brussels for talks overshadowed by waning political fortunes of leaders in Greece and Italy. Greek premier George Papandreou agreed to step down to make way for the formation of a unity government. In Rome, Italian Prime Minister Silvio Berlusconi faced pressure to quit as his majority unraveled before a key parliamentary vote tomorrow. He repeated that he plans to stay on through 2013.

Italian Yields

Italy’s 10-year borrowing costs approached the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. The euro fell against the dollar, extending last week’s 2.5 percent drop. It traded at $1.3710 as of 10:08 a.m. in Frankfurt, from $1.3792 on Nov. 4. The currency has dropped 7 percent since May 2, when it reached a 2011 high, based on closing prices.

Stocks also declined, with the benchmark Stoxx Europe 600 Index slipping 1.4 percent. Italy’s FTSE MIB Index fell 0.6 percent.

Although EU officials have said an agreement on EFSF leveraging won’t be finalized today, finance ministers will discuss technical details on how to partly insure bond sales and set up a special investment vehicle to draw outside money. European leaders outlined plans at an Oct. 26-27 summit.

Luxembourg Prime Minister Jean-Claude Juncker will chair today’s meeting of euro-area ministers. Finance chiefs from the rest of the bloc will meet tomorrow.

IMF Money

Even before the framework for the EU’s new tools is fleshed out, European leaders have struggled to entice investment from outside the region. Chancellor Angela Merkel said last week that G-20 nations wanted to know more before pledging money to the International Monetary Fund to lend to the EFSF.

Merkel told reporters at the G-20 summit in Cannes, France, on Nov. 4 that there were “hardly any countries here that said they will join up” with the EFSF. French President Nicolas Sarkozy said a deal may not come before February.

The leaders pledged that Europe will speed the implementation of measures they negotiated at the summit 11 days ago, including recapitalizing banks and writing down Greek debt.

“I think that they are increasingly getting worried that this might not be enough,” Carsten Brzeski, senior economist at ING Group in Brussels, said in an interview yesterday. “This is the weak spot of the October conclusions.”

Draghi Attendance

The ministers’ meeting will be attended by newly installed European Central Bank President Mario Draghi, who made his debut last week by unexpectedly cutting the benchmark interest rate by a quarter point to 1.25 percent to aid growth. Draghi ruled out expanding the ECB’s purchasing of sovereign debt, calling the program “temporary” and “limited.”

The German government denied a report that G-20 leaders had raised the possibility of using central bank reserves to help bolster the bailout fund. Economy Minister Philipp Roesler told ARD television early today that “the German gold reserve must be untouchable.”

The Frankfurter Allgemeine Sonntagszeitung reported yesterday that using such reserves had been discussed and the issue may be raised again at today’s meeting in Brussels.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Papandreou, Samaras Agree to Create National Unity Government for Greece

By Marcus Bensasson - Nov 7, 2011 3:20 AM GMT+0700

Greek Prime Minister George Papandreou and Antonis Samaras, the leader of the main opposition party, agreed to form a government of national unity that will implement decisions related to international financing and then hold elections.

Papandreou won’t lead the new government, according to the statement handed to reporters in Athens today. President Karolos Papoulias will hold a meeting of political party leaders tomorrow. Papandreou and Samaras will meet to decide on the new premier tomorrow as well, according to the statement.

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Maria Petrakis at mpetrakis@bloomberg.net

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Tokyo Exchange in Talks With Osaka: Nikkei

By Nick Baker - Nov 7, 2011 6:37 AM GMT+0700

Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. have entered final takeover talks, forging a deal that would unite Japan’s largest bourse operators next year, Nikkei reported, without citing anyone.

Tokyo Stock Exchange, which runs the main venue in the world’s third-largest equity market, would offer to buy between 50 percent and 66 percent of Osaka, according to the newspaper. Nikkei said today that Tokyo Stock Exchange would be valued 1.5 to 2 times more than Osaka, which had a market capitalization of 98.6 billion yen ($1.26 billion) at the end of last week.

Tokyo Stock Exchange has made no decision like that reported today, the bourse said in a Japanese-language statement posted on its website. Osaka’s bourse has made no decision on a merger, it said in a statement. Osaka Securities Exchange, Japan’s second largest, was poised to rise 16 percent to 423,000 yen from the closing price of 365,000 yen.

Atsushi Saito, TSE’s president, said in a March 10 interview that he planned discussions with Osaka, a day before Japan’s record earthquake. While the Tokyo bourse isn’t publicly traded, the Nikkei report implies it will be valued more than Chicago Board Options Exchange owner CBOE Holdings Inc. (CBOE) and less than London Stock Exchange Group Plc, Bloomberg data show.

‘Benefit Of Merging’

Tokyo is “the last large private exchange in the world’s financial centers,” Jamie Selway, a managing director at New York-based Investment Technology Group Inc., said in a telephone interview. The company would “get the benefit of merging into a public company. There’s a cost savings in terms of not having to do an IPO.”

The global financial crisis, which drove the Nikkei 225 Stock Average to a 26-year low, prompted the Tokyo exchange to delay an initial public offering in March 2009.

Tokyo Stock Exchange is valued between $1.89 billion and $2.52 billion, according to the ratio in Nikkei’s report today. Added to Osaka’s Nov. 4 market capitalization, the combined company has a value of $3.15 billion to $3.78 billion, the data show. That’s more than Chicago-based CBOE at $2.46 billion and smaller than London Stock Exchange at $3.79 billion.

Hong Kong Exchanges & Clearing Ltd. is the world’s biggest bourse operator at $18.9 billion, followed by Chicago-based CME Group Inc. (CME) at $18.1 billion.

More than $30 billion in exchange mergers have been announced worldwide since October 2010. One has been approved by shareholders: Deutsche Boerse AG’s bid for NYSE Euronext. London Stock Exchange’s offer for Toronto-based TMX Group Inc. was withdrawn because too few owners supported it, and Australia blocked Singapore Exchange Ltd.’s bid for ASX Ltd.

An alliance with Osaka would give the Tokyo exchange access to Nikkei 225 Stock Average futures trading after Asia topped Europe and the Americas last year in terms of derivatives transactions. The Tokyo Stock Exchange is facing competition from Chi-X Japan Ltd., an alternative equity venue that began trading in July 2010.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Buffett-Backed BYD E6 No Match for BMW Where Price Matters: Cars

By Bloomberg News - Nov 6, 2011 11:01 PM GMT+0700

For the price of BYD Co.’s electric vehicle, Chinese consumers could buy a BMW and still have enough spare cash for more than one year’s worth of gas.

BYD’s E6, used in Shenzhen as taxis, has been on sale since Oct. 26 to individuals for 249,800 yuan ($39,300) -- after government subsidies. That’s 36 percent more expensive than Bayerische Motoren Werke AG’s 120i and 16 percent higher than Audi’s A3 Sportback.

The price, coupled with a lack of charging stations, illustrates why the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. may turn off consumers. BYD is counting on electric cars for future growth as it faces slowing demand and mounting competition with gasoline-run automobiles in a country where the average household makes less than 60,000 yuan in disposable income a year.

“It will take 5-to-10 years and further development of the technology and infrastructure before retail consumers will consider” purchasing electric vehicles, said Bill Russo, a senior adviser at Booz & Co. in Beijing. “Saving the planet is not their priority.”

China, the world’s largest polluter, is promoting alternative-energy vehicles to reduce emissions and fuel imports. The government has a five-year plan that calls for 1 million electric-powered automobiles to be on its roads by 2015, according the Ministry of Science and Technology.

The central government is offering anyone who buys an energy-efficient car in Shanghai, Shenzhen and four other Chinese cities, a 60,000 yuan subsidy.

Electric Cars

BYD says customers will get their money’s worth. The five- seater E6 can run for 300 kilometers (186 miles) per charge, comes equipped with keyless ignition, an onboard navigation system and rear-view cameras, according to the company. The car is available at nine dealerships in Shenzhen, where BYD has its headquarters, and its availability will be expanded to other cities, according to the company.

“We are confident that E6’s quality will appeal to consumers,” Senior Vice President Lian Yubo said in an interview in Shenzhen on Oct. 26, declining to give a sales target. “There is limited production capacity and supply of the car so we think the price is appropriate.”

The E6 will cost $672 a year in power bills, compared with $1,571 in fuel costs for an equivalent family sedan that runs on gasoline, according to BYD projections based on annual mileage of 15,000 miles. BYD’s self-developed iron-phosphate battery takes 40 minutes to fully charge at public stations and as long as six hours when plugged in at home.

First Mover

Development of electric cars is a “key strategy for BYD,” the company said in an e-mail. The first major domestic automaker to offer electric vehicles to individual buyers in China, BYD has failed to translate head starts into market share in the past.

In 2008, it introduced the plug-in hybrid car F3DM in China from 149,800 yuan, compared with 59,800 yuan for the gasoline version. The automaker sold 906 of the dual-powered cars as of September, according to the China Association of Automobile Manufacturers.

BYD, formed 16 years ago as a battery maker, began developing electric cars in 2003, when the company expanded into automobile manufacturing. Its investments in the technology include a 1.5 billion yuan production line in Huizhou, Guangdong province, to make rechargeable batteries for cars, according to spokeswoman Veronica Jiang. She declined to give an investment amount for the E6.

MidAmerican Energy Holdings Co., a unit of Berkshire Hathaway, in July 2009 bought 9.9 percent of BYD for HK$1.8 billion, or HK$8 apiece. The stock climbed to as high as HK$85.50 in October that year and has since declined 78 percent in Hong Kong, last closing at HK$18.96.

Profit Plunge

Earnings are falling too. The company said Oct. 28 it expects profit to decline by as much as 65 percent this year after dropping 89 percent during the first half. China’s end to tax breaks for small cars led to 13 straight months of lower sales at BYD before a rebound in September, according to the nation’s auto manufacturers’ association.

The Chinese automaker faces a difficult task in convincing consumers to choose the E6 over entry-level luxury cars from companies such as BMW and Volkswagen AG (VOW)’s Audi in the world’s largest car market, said George Yin, an analyst with BOCOM International Holdings Co. in Beijing.

“There are way too many choices for Chinese consumers to shop for both foreign and local brands,” he said. “It’s a bad strategy to start as a taxi before expanding to retail sales if BYD really wants to make the E6 a volume product.”

Lexus, Audi

Audi’s A3, equipped with a guiding system that helps drivers parallel park, starts from 216,000 yuan, according to Cheshi.com, a pricing guide tracking more than 3,000 dealers in the country. The BMW 120i hatchback sells from 184,000 yuan, according to the website.

Still, the E6 is cheaper than Toyota Motor Corp.’s Lexus CT 200h hybrid hatchback, which was introduced in China on the day BYD unveiled the E6 and starts at 279,000 yuan. The car features a voice-activated GPS navigation system and radar cruise control.

BYD is counting on the government to help boost the popularity of the E6.

The city government will strive to facilitate the usage of electric vehicles and promote the E6, Li Ganming, a deputy director of the National Development and Reform Commission’s Shenzhen branch, said at last month’s BYD event, without elaborating.

The fleet of E6 taxis, operated by Pengcheng Electric Taxi Co., has clocked 600,000 kilometers since they were introduced in Shenzhen in May 2010, the company said on its website.

Domestic rivals say they’re in no rush to sell their own electric vehicles. Anhui Jianghuai Automobile Group Co., China’s biggest exporter of light trucks, will wait for the government to build more charging stations before starting sales of EVs to the public, Yang Jun, a deputy general manager with the automaker, said last month. The automaker has sold 550 electric vehicles to its employees.

Shenzhen, which spans across 1,953 square kilometers, has 60 charging stations. By comparison, neighboring Hong Kong, whose area is 43 percent smaller, plans to triple its number of charging stations to 1,000 in a year, Edward Yau, the city’s environment secretary, said in September.

“While being first carries the benefits for building an image as a technology leader, I believe we have already seen how quickly that can turn into a burden,” said Booz’s Russo. “The price needs to come down substantially in order to attract retail consumers.”

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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Thailand’s Floods Edge Closer to Central Bangkok, May Last for Three Weeks

By Suttinee Yuvejwattana - Nov 6, 2011 2:14 PM GMT+0700

Floodwaters edged closer to central Bangkok today, reaching the northernmost station on the city’s inner-city rail system, as Prime Minister Yingluck Shinawatra warned the deluge may take as long as three weeks to drain.

“The amount of water is massive,” Yingluck said after visiting a flooded district on the city’s outskirts. “It may take two to three weeks for the water to drain to the sea, so we are asking people to be patient.”

Authorities completed a 6-kilometer (3.7-mile) wall of sandbags along a canal north of Bangkok, part of a network of levees that are being used to help divert a slow-moving mass of water around the city center and protect industrial zones east of the capital, Yingluck said. Thailand’s floods have claimed 506 lives since late July and shuttered 10,000 factories in provinces north of Bangkok, disrupting global supply chains.

Floodwaters that forced the closure of one of the nation’s biggest shopping mall in the Ladproa district last week have continued moving south toward the city center, and may reach Din Daeng and Victory Monument, Bangkok Governor Sukhumbhand Paribatra said on his official Facebook page late yesterday.

The monument, erected in 1941 to commemorate the Franco- Thai War, is a major traffic intersection northeast of the city center, and a stop on Bangkok’s elevated railway network known as the skytrain. Floodwaters reached the Mochit skytrain station yesterday, though operations weren’t disrupted, according to the government’s travel website.

Angry Residents

The Thai capital is facing a dual threat from floodwaters from the north and angry residents intent on tearing down defensive walls and the government’s so-called “big-bag” dike, Yingluck said.

“Please don’t destroy the big-bag dike and other barriers,” Yingluck wrote today on her official Facebook page. “Please think about the overall benefit so we can get through this problem together.”

Bangkok’s business districts of Silom and lower Sukhumvit Road remain dry and Suvarnabhumi Airport and public transport links are unaffected. The airport’s perimeter is protected by a 3.5-meter-high dike, Airports of Thailand Pcl said last week.

Evacuations have been ordered in almost a quarter of Bangkok’s 50 districts, the Bangkok Metropolitan Administration said.

Floodwaters were as deep as 60 centimeters in Ladprao, the government’s Flood Relief Operation Command said in an e-mailed statement late yesterday. Water reached TMB Bank Pcl’s headquarters on Phaholyothin Road and flooding also affected Chatuchak market, the state agency said.

Monsoon Rains

The disaster worsened last month, when rainfall about 40 percent more than the annual average filled dams north of Bangkok to capacity, prompting authorities to release more than 9 billion cubic meters of water down a river basin the size of Florida, with Bangkok at its southern tip.

The deluge spread over 64 of Thailand’s 77 provinces, damaging World Heritage-listed temples in Ayutthaya province, destroying 15 percent of the nation’s rice crop and flooding the homes of almost 10 million people, according to government data.

The floods have already swamped seven industrial parks, halting production at factories operated by companies including Western Digital Corp. and Nidec Corp.

The Bank of Thailand, which last month slashed its 2011 economic growth forecast to 2.6 percent from 4.1 percent, expects expansion to slow as the global economy weakens and the impact of the nation’s flood crisis increases, according to the minutes of its Oct. 19 meeting.

Rehabilitation

Rehabilitation efforts have begun in parts of Nakhon Sawan province and will start soon in Ayutthatya as flood waters recede, Yingluck said yesterday. The government has an initial budget of more than 100 billion baht ($3.3 billion) to help rebuild damaged areas, she said, adding that Cabinet will discuss new measures to help the economy recover on Nov. 8.

“We can’t lose the battle this time,” Army chief Prayuth Chan-Ocha told reporters Nov. 4. “If we’re defeated, the damage to the country will be tremendous. Now we’re still fighting, but the enemy is massive.”

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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