Ireland Considers Bank Aid in ‘Certain Circumstances’

By Dara Doyle

Nov. 29 (Bloomberg) -- Ireland’s government said it may invest with other parties in the nation’s banking system as the country’s lenders seek to shore up capital depleted by the global financial crisis and the end of a decade-long property boom.

“In certain circumstances it would be appropriate for the state, through the National Pensions Reserve Fund or otherwise, to consider supplementing private investment,” Finance Minister Brian Lenihan said in an e-mailed statement late yesterday.

Lenihan, speaking after meeting executives from the country’s six biggest lenders in Dublin, said he hadn’t made any proposals on mergers between the lenders.

The Irish Association of Investment Managers, whose 12 members manage about 260 billion euros ($331 billion), said this week it had approached Lenihan on behalf of a “number of investment institutions” considering injecting money into four publicly traded lenders. The Dublin-based association hasn’t identified the institutions.

Ireland’s banks are facing rising losses on property loans and falling profit amid the seizure in global credit markets. While the government has guaranteed the deposits and borrowings of its six biggest lenders, it has so far stopped short of following other European states and investing in the banks.

Lenihan “welcomes the views of a number of institutions that they are open to raising additional capital,” he said in the statement. “For certain institutions the need for additional capital may be very modest, whereas for others the need may be greater.”

The banks will work with investors and the government to “develop matters” by the end of the year, he said.

Dublin-based Bank of Ireland Plc, the country’s biggest bank by assets, said on Nov. 24 it had received “unsolicited approaches” from bidders looking to buy stakes. Buyout firms including J.C. Flowers & Co., the Carlyle Group and Irish hedge fund Cardinal Asset Management approached the Irish government about investing in the Dublin-based bank, the Irish Times has reported.

The government may draw on a national pension fund which was valued at 18.7 billion euros ($23.8 billion) at the end of the third quarter. Created in 2001 to finance future pension payments, the fund began by investing in stocks and bonds, and has diversified into property, private equity and commodities.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

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Louis Vuitton Cuts Prices in Japan to Boost Sales, Nikkei Says

By Stuart Biggs

Nov. 29 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, lowered retail prices for its Louis Vuitton brand in Japan by 7 percent yesterday to boost sales, Nikkei English News reported.

The price cuts apply to nearly all items sold, including bags, watches, apparel and shoes, at the company’s 56 stores in Japan, Nikkei cited the company as saying.

The price reductions reflect the yen’s strength against the euro with most Louis Vuitton products imported from France, the report said. Louis Vuitton sales fell 7 percent in Japan in the first nine months of the year, the report said.

To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.

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Holiday Sales Kick Off With Discounts to Lure U.S. Customers

By Beth Jinks and Allison Abell Schwartz

Nov. 29 (Bloomberg) -- U.S. retailers that lowered prices as much as 70 percent on the day after Thanksgiving may see sales eroded by steeper price cuts in what may be the worst holiday shopping season in six years.

Bargains such as Best Buy Co.’s Toshiba Corp. satellite laptop computer for $379.99, a $270 discount, and Gap Inc.’s buy-one-get-one free holiday sweater offer may leave retailers with slowing sales even as they entice more people to visit stores during the holidays.

Retailers are looking for year-end demand to make up for stagnating sales and waning consumer confidence. The holiday months might account for a third or more of stores’ annual profit, and consumer spending makes up more than two-thirds of the U.S. economy, which is falling deeper into a recession.

“The consumer is scared out of their wits and they’re just going to spend less,” Howard Davidowitz, chairman of retail consultant Davidowitz & Associates in New York, said yesterday. “The consumer is now saying ‘Unless something sells at a certain price, I’m done.’”

Individuals may spend an average of $616 on holiday gifts this year, down 29 percent from a year earlier, according to a Gallup Inc. poll.

Retailers promoted “doorbuster” deals to attract customers on the Friday after Thanksgiving, said to be when retailers started to make their annual profit.

One Dead

A worker was trampled by customers and killed yesterday at a Wal-Mart Stores Inc. location in Long Island, New York, according to local police and the company. At least four shoppers were hurt at the store in Valley Stream, located about 13 miles (20 kilometers) from New York City, Nassau County Police said in a statement.

November and December sales at stores open at least a year may rise 1 percent, the smallest gain since 2002, according to the International Council of Shopping Centers, a New York-based trade group.

Retailers used lower prices at earlier hours to win customers that were starting their holiday shopping with less than four weeks before Christmas.

Kohl’s Corp., the fourth-largest U.S. department store, opened at 4 a.m. Wal-Mart and Macy’s Inc. had a 5 a.m. start. Gap opened some locations on Thanksgiving Day.

Wal-Mart, based in Bentonville, Arkansas, has bucked the trend, with its emphasis on low prices winning customers during the economic slump. The retailer is the only Dow Jones Industrial Average company to have risen this year. It’s gained 18 percent, while the 30-member index has tumbled 33 percent.

Black Friday

Discounts on the Friday after Thanksgiving, called Black Friday, pulled in consumers who felt the pinch of the economic slump and higher fuel prices earlier this year.

Crowds at the Woodfield Mall in Schaumburg, Illinois, today “gives me optimism that that the 2 percent growth I’m forecasting can be reached” during the holiday period, Jay McIntosh, president of Consumer Foresight LLC, a Chicago-based consulting firm, said today in a Bloomberg Television interview.

Under-30 adults, who may not have been hurt as much as older consumers by stock-market declines, were out shopping, McIntosh said.

“Virtually every store I walked by was crowded,” McIntosh said. “The small specialty retail stores were crowded. Last year, they weren’t.”

Malls operated by Taubman Centers Inc. saw a similar presence of young shoppers, spokeswoman Karen Mac Donald said.

The Fairlane Town Center mall in Dearborn, Michigan, had more early and younger shoppers this year, Mac Donald said in an e- mail. About 75 lined up at the Aeropostale location by 4:30 a.m.

Richard Simmons

Fitness personality Richard Simmons, wearing red-and-white- striped very short shorts, sneakers and a red muscle shirt with fluffy white Santa trim, bounced around the outside of Macy’s in New York’s Herald Square early yesterday morning, where crowds mobbed every entrance in advance of its opening.

Richard Feijoo, 21, and his twin brother Jesus from Brooklyn were waiting at the front of the line at Herald Square and were shopping for themselves.

“It’s low prices, a good store and it’s Black Friday, so we’re here early,” Richard said. “Jeans, Levi’s, only clothes. I go shopping at Macy’s in Brooklyn so I know exactly what I’m looking for.

There were 5,000 people waiting to get in, Macy’s Chief Executive Officer Terry Lundgren said in a Bloomberg Television interview.

“A lot of folks are walking out with bags,” Lundgren said. “We got them in with great values, and what I really hoped is that they will spend more of whatever they’re going to spend at Macy’s, even if it’s less than last year.”

Less Spending

Americans cut spending by 1 percent last month, the biggest decline since the 2001 recession. After adjusting for inflation, spending was down for the fifth straight month, the longest streak since 1990-1991, according to Commerce Department data.

Toys “R” Us Inc., the largest U.S. toy-store chain, is putting “very aggressive” promotions in place to draw in shoppers, Chief Executive Officer Gerald Storch said in an interview.

“We know that value is very important in this economic situation and we’re determined to be aggressive throughout the holiday season in offering that value,” Storch said in a telephone interview.

To contact the reporter on this story: Amy Eagleburger in New York aeagleburger@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

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Skylark Sells $419 Million in New Shares to Nomura, Nikkei Says

By Stuart Biggs

Nov. 29 (Bloomberg) -- Skylark Co., a Japanese restaurant chain, will sell more than 40 billion yen ($419 million) of new shares in a private placement to major shareholder Nomura Holdings Inc., Nikkei English News reported today.

Skylark will also shut outlets and sell two subsidiaries to help the company restructure and reduce debt, Nikkei reported, without saying where it obtained the information. Skylark expects the two subsidiaries to fetch 10 billion yen, the report said.

Nomura Principal Finance Co., the securities firm’s investment arm, holds 62 percent of Skylark, Nikkei said. The group’s total investment in the chain will reach 140 billion yen when it buys the new shares, according to the report.

Skylark posted losses for two consecutive years through fiscal 2007 as sales at family restaurants in Japan fell for 11 years in a row, the report said. Nomura and British private equity fund CVC Capital Partners Ltd. own a combined stake of more than 97 percent in Skylark, the report said.

To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.

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Japan Car Sales May Fall to 34-Year Low in 2008, Nikkei Reports

By Stuart Biggs

Nov. 29 (Bloomberg) -- Sales of new cars in Japan may fall to their lowest in 34 years in 2008 as consumers hit by stock market declines cut back on spending, Nikkei English News reported today, without saying how it got the information.

November sales may reach 200,000 units, down by a third from a year earlier, after declines of 5 percent and 13 percent in September and October, Nikkei said. Sales are expected to total about 3.25 million units this year, the lowest since 1974, the report said.

October output by the country’s 12 automakers fell 6.8 percent from a year earlier, the biggest drop for the month since 1999, to 1.01 million vehicles, the Japan Automobile Manufacturers Association said in a statement yesterday.

To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.

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India Extends Refinance Facility for Banks to June 30

By Sumit Sharma

Nov. 28 (Bloomberg) -- India’s central bank today extended the refinance facility for banks to June 30, 2009, to increase liquidity in the banking system, the Reserve Bank of India said in a statement e-mailed from Mumbai.

The central bank also permitted commercial banks to lend to housing finance companies under a plan that allows mutual funds to borrow to meet redemptions. The measure is valid until June 30, the Reserve Bank said.

Post-shipment credit at concessional rate given to exporters has been extended to 180 days from 90 days, the central bank said.

The measures were announced after Governor Duvvuri Subbarao met with bank chief executives in Mumbai today.

To contact the reporters on this story: Sumit Sharma in Mumbai at sumitsharma@bloomberg.net

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Mumbai Jewish Center Hit by Terror Is Part of Program

By Peter S. Green

Nov. 29 (Bloomberg) -- The Mumbai Jewish center where suspected Islamic terrorists killed a rabbi and his wife is part of a global program run by a Brooklyn-based orthodox group to spread their faith among Jews living and traveling abroad.

The Chabad-Lubavitch movement has about 4,000 rabbis who serve with their wives in more than 3,300 centers in 72 countries and in U.S. cities and college campuses. Gavriel Holtzberg, the 29-year-old rabbi who ran the Chabad mission in Mumbai and his wife Rivka, 28, were among five people killed after gunmen raided the five-story Chabad House synagogue and cultural center Nov. 26 in the city’s Colaba market district.

The Holtzbergs’ two-year-old son escaped from the carnage with his nanny, his trousers stained with blood, Chabad said on its Web site. Two gunmen also died in the attack, which ended yesterday evening in Mumbai when Indian commandos breached a wall of the house with explosives and stormed inside.

“Their toddler son Moishele, who was heroically rescued from the hell by his nanny Sandra, will mark his second birthday tomorrow,” Rabbi Yehuda Krinsky, chairman of the Chabad- Lubavitch movement’s social and cultural arm, said yesterday at a news conference in New York.

Rabbi Leibish Teitelbaum, a Brooklyn native, was also killed, New York City Mayor Michael Bloomberg said in a statement yesterday.

Jewish Texts

The Holtzbergs arrived in Mumbai in 2003 to teach Torah, the study of the key Jewish texts also known as the Old Testament, and run outreach programs, including a drug rehabilitation program, for the many young Israelis who travel through India after completing their obligatory service in the Israeli army.

India has an indigenous Jewish community of about 4,500 people, mostly in Mumbai and Calcutta, according to the American Jewish Joint Distribution Committee, an aid group based in New York.

The Committee runs social and welfare programs for Mumbai’s aging and impoverished Jews, including an old-age home, a secular school open to non-Jews and a meals-on-wheels program for the elderly and infirm unable to leave their homes.

“There is a very active Jewish life in India, especially in Mumbai,” said Judy Amit, the group’s chief operating officer and a former director of its programs in India.

Rabbi Holtzberg helped minister to the Mumbai Jews, although the bulk of those visiting the Chabad house were non- Indians living or traveling in the country, according to both Chabad and Amit.

The Chabad movement, which grew out of the 17th-Century mystical orthodox Hasidic tradition in eastern Europe, aims to increase observance by Jews, not to convert others to Judaism.

‘Goodness and Godliness’

“We are trying to bring more goodness and Godliness to the world to lead to the coming of the Moschiach,” Rabbi Menachim Schmidt, a Chabad rabbi at the University of Pennsylvania, said in an interview. “The more mitzvahs that a person does, the closer it brings the world to Moshiach.” A mitzvah is the Hebrew term for a good deed, and Moshiach is Hebrew for the Messiah.

Jews first arrived in India some 2,000 years ago, according to their oral tradition, possibly by boat from cities in what is now Israel, Amit said. Others, called Baghdadis, came from across the Middle East to British-ruled India and were known as traders and philanthropists, she said.

India’s Jews numbered about 40,000 when the country gained independence from the U.K. in 1947. Since then, most Indian Jews have emigrated to Israel, Britain, Canada and the U.S., Amit said in an interview. The largest remaining community is in Mumbai, which today has eight functioning synagogues.

“There has been virtually no anti-Semitism in India and quite frankly, the fact that a Jewish home was targeted is a matter of concern,” Amit said.

Fedora Hats

The Chabad rabbis are distinguished by their dark suits and wide-brimmed black felt fedora hats, inspired by the clothing once worn by Orthodox Jews and Polish noblemen in some parts of Eastern Europe.

The modern Chabad movement was guided by Rabbi Menachem Schneerson, who died in 1994 and was thought by some of his followers to be the Messiah.

Last week some 4,000 Chabad rabbis from around the world gathered in Crown Heights, Brooklyn, where the movement is based, for the annual meeting of the Shluchim, a Yiddish word meaning emissaries, as the group’s rabbis around the world refer to themselves.

Gavriel Holtzberg was born in Israel and raised in Crown Heights. Rivka Rosenberg Holtzberg was a native of Afula, Israel, according to Chabad.

“Gabi and Rivky Holtzberg made the ultimate sacrifice,” said Rabbi Moshe Kotlarsky, vice-chairman of Chabad’s educational arm. “As emissaries to Mumbai, Gabi and Rivky gave up the comforts of the West in order to spread Jewish pride in a corner of the world that was a frequent stop for throngs of Israeli tourists. Their selfless love will live on with all the people they touched. We will continue the work they started.”

To contact the reporters on this story: Peter S. Green in New York at pagreen@bloomberg.net.

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Pakistan Won’t Send Intelligence Chief to India, CNN-IBN Says

By Debarati Roy

Nov. 29 (Bloomberg) -- Pakistan’s government turned down India’s request to send the chief of the military intelligence agency to investigate the Mumbai terror attacks, CNN-IBN television reported, without saying where it got the information.

Officials of Pakistan’s Inter-Services Intelligence, or ISI, will instead be sent to India, the news channel reported.

Lashkar-i-Taiba or Jaish-i-Muhammad, two Muslim extremist terrorist groups from Pakistan, may be involved in the Mumbai attack, MSNBC reported on its Web site, unidentified analysts and counterterrorism officials.

To contact the reporters on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.

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Singaporean Hostage Killed in Mumbai Terror Attacks

By Chen Shiyin

Nov. 29 (Bloomberg) -- A Singaporean woman who had been held hostage by militants in Mumbai became the first person from the city-state to die in a terrorist attack, the government said.

The body of Lo Hwei Yen was identified by her husband last night, Singapore’s foreign affairs ministry said in an e-mailed statement released late yesterday. The 28-year-old Singapore lawyer was among 24 hostages found dead at the Oberoi-Trident hotel complex, the Straits Times newspaper reported.

The death toll from the attacks on 10 sites in Mumbai reached 160, with 11 militants killed, CNN reported. The Indian government said at least 370 were injured in more than 48 hours of violence as terrorists moved through India’s financial hub, targeting a Jewish center, the Oberoi, the Taj Mahal Palace and Tower hotel, a railroad station and a restaurant.

“Terrorism is a threat that knows no boundaries,” Prime Minister Lee Hsien Loong said in a letter to the victim’s husband that was released by e-mail today. “This is the first time a Singaporean has been a victim of a terrorist attack.”

Government officials are currently providing assistance to the victim’s family and will ensure the return of the body when permitted by Indian authorities, the foreign affairs ministry said in the statement.

“This tragic event underscores the imperative for all of us to be constantly vigilant and the need for the international community to band together to combat this threat,” S. Jayakumar, the island’s acting prime minister, said in a separate e-mailed statement yesterday.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.

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Indian Forces Comb Taj Mahal After Deadliest Attack Since 1993

By Vipin Nair and Stephen Foxwell

Nov. 29 (Bloomberg) -- Indian forces combed the luxury Taj Mahal hotel in Mumbai looking for survivors of the nation's deadliest attack in at least 15 years after commandos killed the remaining terrorists to end a 60-hour siege.

At least 195 people were killed in the attacks on the Taj Mahal Palace and Tower and Oberoi-Trident hotels, a Jewish center, railway station and restaurant, S Jadhav, an official at the city's disaster management unit said.

Two blasts were heard inside the Taj Mahal Hotel after the National Security Guard said in a public announcement it would set off controlled explosions. Firemen who were putting out a blaze that started shortly after daybreak pulled back from the building. Ratan Tata, Chairman of Tata Group, which owns the Taj Hotel, visited the site with officials from the group.

Busloads of commandoes moved in earlier to do a room-by-room search after gunshots and blasts that had rocked the building in the early hours of today subsided. The siege on the hotel is over, Press Trust of India said in a news flash.

The NSG wasn't declaring an end to the crisis until all rooms at the Taj Mahal hotel were searched, J.K. Dutt, director general of NSG commando unit, said at a briefing, adding some guests may still be in the complex.

Foreigners Killed

More than 295 people were injured as the attackers moved through India's financial hub, Jadhav said.

Most of those who died were Indians and a final death toll hasn't been officially released. Five Americans died in the attacks, the U.S. State Department said in a statement. More U.S. citizens are missing. A German, two Australians, two Frenchmen, a Briton, a Japanese, a Canadian, a Singaporean and an Italian were among the dead, the Associated Press said yesterday.

Two rabbis from New York were among five hostages and two attackers who died at the Jewish Chabad-Lubavitch Center in Mumbai when it was stormed by Indian commandos.

The attack is the deadliest in India since a series of bomb blasts rocked Mumbai's commercial landmarks, including the Bombay Stock Exchange building, killing more than 250 people in 1993.

The 1993 blasts were blamed by the police on members of the Mumbai underworld, belonging to Dawood Ibrahim's gang. India says Ibrahim is hiding in Pakistan, a charge the neighboring country denies.

A little-known Islamist group, the Deccan Mujahedeen, claimed responsibility for the shootings and explosions across the western coastal city that started late on Nov. 26, Indian Home Ministry official M.L. Kumawat said.

The attackers began planning their assaults six months ago, India's NDTV reported, citing an account from a captured terrorist. A seized global positioning system showed some of the group left Karachi, Pakistan, as early as Nov. 12, NDTV said.

Advance Surveys

Lashkar-i-Taiba or Jaish-i-Muhammad, two Muslim extremist terrorist groups from Pakistan that have attacked India in the past, may be involved, MSNBC reported on its Web site, citing unidentified analysts and counterterrorism officials. The groups are linked to violence in Kashmir, a region over which India and Pakistan have fought.

The attackers were familiar with their targets and had probably done surveys in advance, a leader of Indian commandos said yesterday in a video on the Times of India Web site.

``We came up against highly motivated terrorists,'' Vice- Admiral J.S. Bedi, whose commandos led the assault against the militants, said in televised comments. He showed pictures of recovered hand grenades, tear-gas shells and AK-47 ammunition.

Multiple Attacks

Multiple attacks have hit cities in India, which is mostly Hindu, with bombs planted in markets, theaters and near mosques this year, leaving more than 300 people dead.

India will ``go after'' individuals and organizations behind the attacks, which were ``well-planned with external linkages,'' Prime Minister Manmohan Singh said in a televised address, without identifying nations.

Pakistan's government turned down India's request to send the chief of the military intelligence agency to investigate the Mumbai terror attacks, CNN-IBN television reported today.

Pakistani President Asif Ali Zardari said earlier he will send the intelligence head to India for the first time to counter claims that the attackers are linked to his country.

Pakistan's ``government will cooperate with India in exposing and apprehending the culprits and the masterminds behind'' the Mumbai terrorist attacks, according to a statement by the president's office, citing Zardari's phone conversation yesterday with Singh.

The attacks in Mumbai show a militant movement among Indian- born followers of Islam is aligning its campaign with those from majority-Muslim countries, while seeking to hit economic interests, B. Raman, the former counterterrorism director of India's intelligence agency, said in a telephone interview yesterday.

To contact the reporters on this story: Vipin V. Nair in Mumbai at vnair12@bloomberg.net; Stephen Foxwell in Mumbai at sfoxwell@bloomberg.net.

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China Won’t Resume New Share Sales Soon: Securities Journal

By Zhang Shidong

Nov. 29 (Bloomberg) -- China won’t resume new share sales soon after two months of suspensions, the China Securities Journal reported, citing the China Securities Regulatory Commission.

China Communications Construction Co., the world’s biggest builder of ports, hasn’t been granted paperwork for near-term domestic stock sales, said the newspaper that’s affiliated with the official Xinhua News Agency. The regulator is controlling the pace of share sales based on the market demand, according to the report.

Agricultural Bank of China, the nation’s third-largest, hasn’t applied to go public as it’s still in the process of being converted into a shareholding entity, it said.

China’s benchmark CSI 300 Index has dropped 66 percent this year on concern corporate-earnings growth will slow due to shrinking demand for Chinese products.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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Chipmakers Huahong NEC, Grace to Merge, Commercial Times Says

By Janet Ong

Nov. 29 (Bloomberg) -- Grace Semiconductor Manufacturing Corp. and Shanghai Huahong NEC Electronics Co. may merge by the first quarter of 2009 at the order of China’s government, the Commercial Times Reported, citing an industry group official.

Merging would help the companies increase their scale and competitiveness amid the global financial crisis, the Chinese- language newspaper said, citing Jiang Shoulei, secretary-general of the Shanghai IC Industry Association.

Shanghai-based Grace Semiconductor is China’s second-largest supplier of customized chips. Huahong NEC is a venture between Japan’s NEC Corp. and Shanghai Huahong Group.

To contact the reporter on this story: Janet Ong in Taipei at jong3@bloomberg.net

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China to Let Overseas Banks Sell Yuan Debt, Economic Times Says

By Mark Lee

Nov. 29 (Bloomberg) -- China will let locally incorporated units of overseas banks sell yuan-denominated debt in Hong Kong as early as next year, the Hong Kong Economic Times reported today.

Yuan bond sales by foreign-controlled banks will probably be smaller than similar transactions by Chinese financial firms as the government seeks to limit currency-exchange risks, the Hong Kong-based newspaper said, citing people it didn’t identify.

Five Chinese financial companies including Bank of China Ltd. and China Construction Bank Corp. have sold 22 billion yuan ($3.2 billion) of bonds in Hong Kong since 2007, the Chinese-language newspaper said.

China opened its financial industry in December 2006, letting overseas banks including HSBC Holdings Plc and Citigroup Inc. set up locally incorporated units to offer deposit and bank cards services.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Australian Voters Want Controls on Corporate Pay, Herald Says

By Gemma Daley

Nov. 29 (Bloomberg) -- More than nine in every 10 Australians think chief executives are overpaid and almost three-quarters want the national government to do something about it, the Sydney Morning Herald said citing a UMR poll.

Ninety-two percent of 1,000 voters polled this week said chief executives were overpaid and 72 percent said the government should regulate their salaries, the paper said without providing a margin of error.

Prime Minister Kevin Rudd yesterday told Melbourne Radio 3AW that executive remuneration restraints may be necessary, the paper said.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

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Cathay Faces Compensation Claims From Airport, Ming Pao Reports

By Mark Lee

Nov. 29 (Bloomberg) -- Cathay Pacific Airways Ltd. may face claims for compensation from Hong Kong’s airport operator for its decision to delay construction of an air-cargo terminal, Ming Pao Daily News reported, citing people it didn’t identify.

Airport Authority Hong Kong will seek to impose a new deadline for Cathay to complete the proposed terminal, the Hong Kong-based newspaper said, citing the people. Cathay had planned to invest HK$4.8 billion ($619 million) on the project, which was scheduled to be completed by the second half of 2011, Ming Pao said.

Cathay, Hong Kong’s biggest carrier, yesterday said it applied to delay construction of the air-cargo terminal by as much as two years to cut capital spending and because of waning air-freight demand. The company also offered staff unpaid leave and scaled back plans to expand passenger capacity.

Chris Lam, a spokeswoman for Airport Authority Hong Kong, and Carolyn Leung, a spokeswoman for Cathay, didn’t immediately reply to phone messages seeking comments.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Babcock Wins A$200 Million Reprieve From Banks, Review Reports

By Gemma Daley

Nov. 29 (Bloomberg) -- Babcock & Brown Ltd. is expected to win the support from its banks for up to A$200 million ($132 million) in new cash funding, the Australian Financial Review reported.

The short-term reprieve ensures the asset manager’s survival until the end of the year, the paper reported, without saying where it got the information.

Babcock, struggling under massive debt as the global credit crunch has pushed up interest costs and prompted large write downs, has secured the new funding agreement because it is close to selling some assets, the paper said.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

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Vietnam’s Eximbank Cancels 2009 Listing on Financial Turmoil

By Van Nguyen

Nov. 29 (Bloomberg) -- Vietnam Export-Import Commercial Joint-Stock Bank, partly owned by Sumitomo Mitsui Financial Group Inc., has canceled its plan to list shares next year due to the global financial crisis, said Le Thi Hoa.

“It is not a good time to list next year given both the domestic and world financial situation,” Hoa, management board vice chairwoman of the lender known as Eximbank, said in an interview today in Ho Chi Minh City. “We will consider better timing and seek approval from our shareholders later.”

The Southeast Asian country’s benchmark VN Index has plunged 67 percent this year as foreign investors retreat from emerging markets amid a global recession. Vietnam on Nov. 6 lowered its growth target for next year to 6.5 percent from a previous forecast of 7 percent.

The Ho Chi Minh City-based lender also reduced its registered capital target this year to 7.2 trillion dong ($424 million), from 7.38 trillion dong planned in March, according to Truong Van Phuoc, Eximbank general director.

The bank will sell 297 million shares worth 2.97 trillion dong next month to existing shareholders, Phuoc said.

As of the end of October, Eximbank’s total asset value was 49.6 trillion dong and its registered capital was 4.2 trillion dong, a surge from 2.8 trillion dong at the beginning of the year, according to a report released at a shareholders’ meeting today in Vietnam’s biggest city.

Pretax profit was 1.2 trillion dong in the first 10 months, an increase of 116 percent from a year earlier, the report said.

Eximbank’s property loans are 4 trillion dong, or 18.2 percent of its outstanding debt at the end of November, according to Phuoc.

Eximbank has sold stakes of 15 percent to Sumitomo Mitsui, Japan’s third-largest bank by revenue, 5 percent to VOF Investment Ltd. of Virgin Islands, 4.5 percent to Mirae Asset Exim Investment Ltd. of South Korea, and 0.5 percent to Mirae Asset Maps Opportunity Vietnam Equity Balanced Fund 1, according to the report.

To contact the reporters on this story: Van Nguyen in Ho Chi Minh City at vnguyen23@bloomberg.net

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Korea Won Leads Gain in Asia Currencies This Week; Rupiah Falls

By Kim Kyoungwha and Bob Chen

Nov. 29 (Bloomberg) -- South Korea’s won rallied this week, leading gains in Asian currencies, as the nation’s record current-account surplus eased a shortage of dollars. The Philippine peso posted its biggest weekly advance in four months.

Seven of the region’s 10 most-traded currencies excluding the yen strengthened over the past five days as shares rose the most in a month after China’s largest interest-rate cut in 11 years. Indonesia’s rupiah and the Thai baht fell for a third week.

“Risk appetite is improving slightly,” said Mitul Kotecha, Hong Kong-based global head of foreign-exchange strategy at Calyon, a unit of France’s Credit Agricole SA. “The trend is still downwards for Asian currencies going into next year. There are still dollar demand and growth concerns.”

The won rose 1.8 percent this week to 1,469 per dollar in Seoul, according to Seoul Money Brokerage Services Ltd. The advance pared this month’s decline to 11 percent, the worst among the world’s 16 most-active currencies. The peso climbed 1.8 percent on the week to 48.96 a dollar.

In South Korea, foreign investors bought more local shares than they sold for a third consecutive day yesterday, the longest stretch since the end of October. Finance Minister Kang Man-Soo said the current-account surplus will exceed $1 billion this month after a record $4.9 billion surplus in October.

“The surplus provides a big psychological boost to the currency market,” said Jeff Kim, a currency dealer with Korea Exchange Bank in Seoul. “An uncontrollable surge in the dollar isn’t there anymore but month-end import deals are flowing in.”

‘Rally in Stocks’

Risk appetite revived as policy makers across the globe unveiled measures to shore up confidence. The People’s Bank of China cut its one-year lending rate by 1.08 percentage points to 5.58 percent on Nov. 26, on the heels of the Federal Reserve’s $800 billion commitment to counter a seizure in credit markets.

The MSCI Asia-Pacific Index of regional shares soared 6.8 percent this week to 82.66, snapping two weeks of losses.

“Sentiment has improved on regional currencies given the rally in U.S. and Asian stock prices,” said Joanna Tan, an economist at Forecast Pte in Singapore. “The overarching factor is still heightening risks to growth.”

The yen headed for its third monthly advance against the dollar and its fourth monthly gain against the euro after the European Union proposed a 200 billion euro ($258 billion) stimulus package.

Japan’s currency traded at 95.52 per dollar from 95.19 on Nov. 27 and 95.96 a week ago. It was quoted at 121.22 per euro in Tokyo yesterday from 122.89 a day earlier, for a 0.4 percent decline this week.

Filipino Remittances

The Philippine peso gained this month on speculation remittances from the more than 8 million Filipinos abroad will increase as the year-end holidays approach. Funds sent home rose 17 percent to $12.3 billion in the first nine months of 2008 from a year earlier, according to the central bank.

Thailand’s baht slumped to a 21-month low on concern political unrest will slow growth in Southeast Asia’s second- biggest economy. The government declared a state of emergency at airports in Bangkok, which were shut by protesters demanding the resignation of Prime Minister Somchai Wongsawat.

“We’ve seen domestic demand weaken all throughout the year, hurt by the political turbulence and amid a sharply slowing global economy,” said Nicholas Bibby, an economist at Barclays Bank Plc in Singapore. “We’re expecting the baht to drift weaker from here, partly due to the political situation.”

The baht fell 0.7 percent on the week to 35.46 per dollar, the second worst-performing currency after the Indonesian rupiah, which slumped 1.6 percent this week to 12,300.

India’s rupee fell 1.4 percent yesterday to 50.1075 after terrorist attacks in the financial capital of Mumbai. The death toll reached 160 after attacks on 10 sites in the city, and 11 terrorists were killed, CNN said.

Elsewhere, the Malaysian ringgit was little changed for the week at 3.6250 and the Taiwan Dollar reached as high as NT$33.216 yesterday, up 0.3 percent from the end of last week.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net. Bob Chen in Hong Kong at bchen45@bloomberg.net.

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Japanese Bonds Complete Monthly Gain as Factory Output Declines

By Theresa Barraclough

Nov. 29 (Bloomberg) -- Japan’s 10-year bonds completed a monthly gain yesterday after a government report showed factory output fell more than expected, signaling a recession in the world’s second-largest economy is deepening.

Yields fell to the lowest level since April on speculation demand for longer-dated debt increased as investors matched a month-end change in a benchmark gauge used to check the performance of their portfolios. Bonds also gained as a report showed inflation slowed for a second month, helping preserve the value of the fixed payments from debt.

“Economic data is a support for bonds,” said Naka Matsuzawa, chief strategist at Nomura Securities Co. in Tokyo. Third-quarter “GDP is likely to be in the minus.”

The yield on the 1.5 percent bond due September 2018 fell 8.5 basis points this month to 1.395 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price gained 0.733 yen to 100.905 yen. The yield reached 1.355 percent yesterday, matching the lowest level since April 16.

Ten-year bond futures for December delivery rose 1.40 this month to 139.38 on the Tokyo Stock Exchange.

Japan’s economy will shrink 0.04 percent in the final quarter of 2008 after it contracted 0.4 percent in the three months to Sept. 30, according to the weighted average forecast in a Bloomberg News survey.

‘Deflationary Risk’

Consumer prices excluding fresh food rose 1.9 percent in October from a year earlier, after gaining 2.3 percent in September, the statistics bureau said in Tokyo yesterday. Industrial production fell 3.1 percent, more than the 2.5 percent decline forecast by economists surveyed by Bloomberg.

“The recession is likely to continue through mid-2009,” Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp. in Tokyo, wrote in a report Nov. 27. “Easing of global market pressure, expectations of deflationary risk and BOJ policy easing expectations should” lead to lower yields.

Inflation-linked bonds worldwide are yielding more than conventional debt, signaling investors expect deflation, or a drop in consumer prices, will worsen.

The extra yield 10-year conventional Japanese bonds offer over similar-maturity inflation-linked debt, known as the breakeven rate, was at minus 195 basis points yesterday, according to data compiled by Bloomberg. The U.S. five-year breakeven rate was minus 72 basis points and the three-year U.K. breakeven spread was minus 191 basis points on Nov. 27.

Reduced Holdings

“We’ll see deflationary pressure on Japan’s economy emerge because of the effect the global financial crisis will have on capital spending,” Economic and Fiscal Policy Minister Kaoru Yosano said at a press conference in Tokyo yesterday. “That’s something we need to be cautious about.”

Even so, overseas investors sold more Japanese government bonds than they bought last week for a 10th consecutive week.

Foreign “investors are reducing risk on the whole,” said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest bank by assets. “There is a lot of concern about financial markets and the risk appetite is reduced. We will see a similar trend going forward.”

Overseas investors sold 839 billion yen ($8.81 billion) of Japanese bonds in the week ended Nov. 21, according to figures based on reports from designated major investors released by the Ministry of Finance in Tokyo.

Index Weightings

Nomura Securities Co. will increase the average duration of its Bond Performance Index to 6.31 years from 6.16 years in December, according to the company’s Web site.

“The longer-dated sectors will be strong given the extension trade,” said Kazuhiko Sano, chief strategist in Tokyo at Nikko Citigroup Ltd., the Japanese unit of the second-largest U.S. bank by assets.

Money managers such as Japan’s Government Pension Investment Fund, which runs the world’s largest pool of retirement wealth, use Nomura’s index to help decide their holdings. Duration is a gauge of how much a change in yields affects the price of a bond or debt portfolio.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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Asian Stocks Have Second-Best Week in 2008 on Stimulus Spending

By Chua Kong Ho

Nov. 29 (Bloomberg) -- Asian stocks had their second-best week this year after China slashed interest rates, spurring speculation government measures will pull the global economy out of recession and boost demand.

Inpex Corp., Japan’s largest energy explorer, jumped 26 percent in Tokyo after oil had its best week in six months. Zijin Mining Group Co., China’s largest gold producer, surged 25 percent as bullion climbed. Guangzhou R&F Properties Co. jumped 41 percent after China cut its key lending rate by the most in 11 years to revive the world’s fourth-largest economy, three weeks after the government announced a stimulus plan worth more than $500 billion.

“Sentiment is stabilizing,” said Kwon Hyeuk Boo, a fund manager at Daishin Investment Trust Management Co. in Seoul, which oversees about $1.4 billion in assets. “Investors are buying into expectations that support measures will keep coming. China’s strong will to support its economy is serving as a key catalyst to Asian markets.”

The MSCI Asia Pacific Index rose 6.8 percent to 82.67, the second-best gain this year, surpassed only by a 6.9 percent rally at the end of October, when central banks from Japan to Taiwan lowered borrowing costs. Commodities producers had the biggest gains among the 10 industry groups.

Elpida, Powerchip

Japan’s Nikkei 225 Stock Average advanced 7.6 percent to 8,512.27. Elpida Memory Inc., Japan’s biggest memory-chip maker, climbed 27 percent after saying it plans to gain control of a production venture with Taiwan’s Powerchip Semiconductor Corp.

Asian shares also climbed after the U.S. Federal Reserve committed $800 billion to unfreeze credit markets, while Citigroup Inc. received a $306 billion government rescue and the European Union proposed a 200 billion euro ($257 billion) spending package.

The gain for MSCI’s Asia Pacific index pared November’s drop to 3.8 percent, the seventh monthly decline and the longest losing streak since the gauge began in December 1987.

Australia’s S&P/ASX 200 Index surged a record 9.5 percent this week. India’s Sensitive Index rose 2 percent even as militant attacks that started Nov. 26 in Mumbai left more than 150 people dead. Thailand’s SET Index climbed 1.1 percent, lagging the regional rally, as the main international airport remained paralyzed for a fifth day after being seized by anti- government protestors.

Writedowns

MSCI’s Asian index has plunged 48 percent in 2008 as global financial companies’ losses and writedowns from the collapse of the U.S. subprime-mortgage market neared $1 trillion.

Shares on the MSCI gauge are now valued at 10.2 times trailing earnings after falling to as low as 8.2 times last month. That compares with 19.5 times on Nov. 11, 2007, when the measure hit a peak of 172.32. Prior to the current market turmoil, the price-earnings ratio never dropped below 10, according to Bloomberg data.

Inpex, Japan’s largest oil explorer, added 26 percent to 612,000 yen. Zijin Mining climbed 25 percent to HK$2.80. Sumitomo Metal Mining Co., Japan’s second-biggest copper smelter, rallied 30 percent to 908 yen after saying Nov. 21 it plans to buy back up to 2.83 percent of its outstanding shares through Dec. 19.

BHP Billiton Ltd. surged 42 percent to A$31 after abandoning a yearlong pursuit of rival mining company Rio Tinto Group and as the price of oil and metals rebounded. BHP blamed the rout in commodities prices and the credit-market squeeze for derailing the $66 billion bid.

Rio Rating

Rio Tinto slumped 22 percent to A$46.60 as Standard & Poor’s Ratings Service said it may downgrade the company’s credit rating because of its high level of debt and declining commodity prices.

Crude oil rose 9 percent this week, the most since March 2007. A measure of six metals traded on the London Metal Exchange, including copper and zinc, had the biggest weekly gain this month.

Guangzhou R&F gained 41 percent this week to HK$4.78, the most since its listing in July 2005. Sino-Ocean Land Holdings Ltd., which develops residential and commercial real estate in northern China, advanced 35 percent to HK$2.65.

“There’s certainly a lot of significance in the rate cut,” said Tahnoon Pasha, Hong Kong-based head of Asian equities at MFC Global Investment Management, which oversees $213 billion in assets globally. “It has a meaningful impact on the cost of borrowing for a number of relatively highly leveraged companies which run large balance sheets. These guys are going to see real improvement in their bottom lines because of the rate cut.”

People’s Bank

The People’s Bank of China Nov. 26 cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. China is the largest trading partner for Japan and Australia and was the biggest contributor to global economic growth last year.

The Chinese economy is deteriorating more quickly as the impact of the global financial crisis spreads, underscoring the need for “forceful” measures to support growth, said Zhang Ping, chairman of the National Development and Reform Commission, this week.

Komatsu Ltd. rose 14 percent to 1,144 yen on speculation demand for its excavators will increase in China. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, gained 22 percent to HK$3.54. China Railway Group Ltd., Asia’s biggest construction company, added 13 percent to HK$5.13.

Panasonic Shock

Panasonic Corp., the world’s largest consumer-electronics maker, declined 18 percent to 1,144 yen, the lowest since June 26, 2003, in Tokyo after slashing its full-year profit forecast by 90 percent, citing the global recession and a drop in product prices.

Elpida jumped 27 percent to 445 yen. The Tokyo-based chipmaker will increase its stake in joint venture Rexchip Electronics Corp. to 52 percent, Hsinchu-based Powerchip said Nov. 27. The investment will give Elpida control of a factory that runs on the latest technology for making computer-memory chips at a fraction of the cost of building a plant.

Indian Hotels Ltd., the nation’s biggest hotel operator and which manages one of the hotels that was attacked, plunged 16 percent to 40.15 rupees in Mumbai. Jet Airways (India) Ltd., the nation’s largest domestic airline, slumped 14 percent to 129.5 rupees.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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Australian Government, States Agree on Spending Plan

By Gemma Daley

Nov. 29 (Bloomberg) -- Australian Prime Minister Kevin Rudd said the federal government and the states agreed to a A$15.1 billion ($9.9 billion) spending package that will create jobs as the country confronts the global financial crisis.

The plan, chiefly targeting health and education, will generate work for 133,000 people, Rudd said in Canberra. Forecast budget surpluses will fund new spending to start this fiscal year and extend over the following four years.

“This A$15.1 billion addition to the states will create jobs and stimulate the economy,” Rudd told reporters in Canberra today after meeting with eight state and territory leaders. “It will drive a reform agenda in health, education, as well as housing and businesses deregulation.”

Today’s meeting was part of annual talks on national government funding for the states, including allocations from the 10 percent tax on goods and services. The package adds to A$332 billion of funding for the states forecast for this and the next three financial years. The government on Oct. 14 announced A$10.4 billion in grants to pensioners, families and first-home buyers as the global financial crisis freezes credit.

Rudd increased health funding by A$5.55 billion to A$64.4 billion over five years and added A$1.4 billion to an education package worth a total of A$42.4 billion. He also bolstered funds to build properties for the homeless.

‘Modest Surplus’

The spending programs, which have an average timespan of four to five years, won’t push the government into deficit, and would allow it to maintain “a modest surplus,” Rudd said.

“Projecting surpluses four years out is pretty heroic, particularly in current economic times, and we hope to see the government’s accounts in good shape,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “Still, Australia needs to invest in infrastructure and be ahead of the curve on spending to boost the economy.”

Treasurer Wayne Swan on Nov. 5 slashed the forecast budget surplus by 75 percent, citing the slowest economic growth in eight years. Rudd said Nov. 26 the government may allow its budget to go into deficit for the first time in seven years if the global economic slowdown worsens.

Reserve Bank Governor Glenn Stevens said Nov. 19 he would be comfortable if state and federal governments increased public spending, “even if that involves some prudent borrowing.”

Growth Forecast Slashed

Australia would join other developed nations forecasting budget deficits in 2009. The U.S. government shortfall may top $1 trillion next year and spending in the U.K. will swell the budget deficit to 118 billion pounds ($181 billion) in the year starting April 2009.

Australia’s budget was last in deficit in the year ending June 30, 2002. The budget was in deficit for eight years of Labor’s last term in office between 1983 and 1996.

The Reserve Bank of Australia this month reduced its 2008 economic growth forecast to 1.5 percent from 2 percent. The central bank has slashed its benchmark interest rate 2 percentage points since September to 5.25 percent.

Australia’s leading economic index fell in September, signaling the nation may slip into a recession, ending 17 straight years of economic expansion, Westpac Banking Corp. and the Melbourne Institute said on Nov. 19.

“This investment will deliver a significant stimulus to the Australian economy in the face of the global financial crisis,” Rudd said. “2009 is going to be a tough year.”

Australian business confidence plunged in October to a record low, consumers were pessimistic in November for a 10th straight month and house prices dropped in the third quarter by the most since 1978.

“These are important steps towards better outcomes in health, education, business regulation and other fields,” Business Council of Australia Chief Executive Katie Lahey said in an e-mailed statement. “This commitment to reforms that build the productive capacity of the economy can provide a timely boost to business confidence.”

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

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TPG’s Indonesia Affiliate, Bakrie to Control Bumi

By Leony Aurora

Nov. 29 (Bloomberg) -- TPG’s Indonesian affiliate and PT Bakrie & Brothers will form a venture to control PT Bumi Resources in a deal that will help Bakrie pay debt raised by pledging shares of Asia’s biggest exporter of power-station coal.

Northstar Equity Partners, the Indonesian affiliate of U.S. buyout firm TPG, will take over $575 million of Bakrie & Brothers’s debt as part of the transaction, Bakrie & Brothers President Director Nalinkant Rathod said in a briefing in Jakarta late yesterday.

The agreement will enable Bakrie & Brothers, controlled by the family of Welfare Minister Aburizal Bakrie, keep a stake in its biggest unit. The investment company said on Oct. 31 it will sell its 35 percent stake in Bumi to Northstar to raise $1.3 billion. The value of the stake has since plunged 56 percent to $566.8 million.

“It’s a first step toward resolving Bakrie’s debt and that should be positive,” said Cholis Baidowi, who helps manage about $124 million at PT Trimegah Securities in Jakarta. Still, without knowing how much of Bumi’s stake Northstar will obtain from the deal, it’s difficult to assess the impact on the coal miner’s share price, Baidowi said.

Pledging Shares

Bakrie & Brothers, which planned to repay $1.2 billion of debt raised pledging shares of Bumi and other units, has paid $200 million of the debt “partly with shares,” Rathod said. Bakrie will pay an additional $200 million by the end of 2008. Northstar will pay $575 million to Odickson Finance SA and own the shares pledged to the creditor, he said.

The balance of the debt is covered by a foreign-exchange transaction gain, Rathod said without giving details.

“All Bakrie & Brothers problems are resolved” with the new agreement, Rathod said. “Before year-end, we’ll know the composition of Bumi’s shares to be owned by Northstar and Bakrie.”

There’s no option for Bakrie & Brothers to buy back the shares, he said.

Bumi climbed 9.8 percent to 1,010 rupiah in Jakarta trading after falling as much as 6.5 percent.

Bakrie & Brothers borrowed $1.39 billion and 560.8 billion rupiah ($46 million) between April and October. Some creditors have sold the coal producer’s shares as the price dropped.

The sale of pledged shares after the stock price plunged may mean Bakrie & Brothers now owns less than 35 percent of Bumi.

To contact the reporter on this story: Leony Aurora in Jakarta at laurora@bloomberg.net.

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Malaysia Needs More Rate Cuts as Growth Falters, Economists Say

By Stephanie Phang and Michael Munoz

Nov. 29 (Bloomberg) -- Malaysia needs to cut interest rates further and implement public spending plans to avoid a deeper slump after the global recession pushed growth in the Asian economy to a three-year low last quarter, economists say.

Southeast Asia’s third-largest economy expanded 4.7 percent in the third quarter from a year earlier, slowing from a revised 6.7 percent gain in the previous three months, the central bank said yesterday.

“Sustaining domestic demand will be the key to ensuring that growth in 2009 will remain positive,” Bank Negara Malaysia Governor Zeti Akhtar Aziz said in Kuala Lumpur yesterday. “Our policies therefore are focused on sustaining domestic demand to mitigate the impact of weaker global growth.”

Asian countries including Malaysia and the Philippines are relying on domestic demand to support growth as recessions in the U.S., Japan and Europe hurt exports of made-in-Asia Intel Corp. chips and other goods. Malaysia this month cut interest rates for the first time since 2003 and announced a 7 billion ringgit ($1.9 billion) spending plan to bolster its economy.

“Exports are no longer the pillar of growth,” said Lee Heng Guie, chief economist at CIMB Investment Bank Bhd. in Kuala Lumpur, who expects the central bank to cut its benchmark rate to 2.75 percent by the end of 2009 from 3.25 percent now. “The execution of public projects is crucial as any delay or slow disbursement of funds will pull down the growth.”

Malaysia’s benchmark stock index declined 0.4 percent at the 5 p.m. close of trading yesterday, before the economic data was released. The ringgit dropped 0.1 percent to 3.6205 against the dollar.

Stimulus Plans

The pace of growth in Asian economies will probably ease “substantially” as the global slowdown erodes demand for their exports and banks restrain lending amid the credit crunch, the International Monetary Fund said Nov. 24. The slump has prompted policy makers from China to the U.S. to cut lending rates and announce spending packages to sustain growth.

Bank Negara cut its overnight policy rate by a quarter of a percentage point to 3.25 percent on Nov. 24 and lowered the amount of money lenders need to set aside as reserves to support economic growth. The benchmark rate will probably fall by another half percentage point by March, according to Aseambankers Malaysia Bhd., Oversea-Chinese Banking Corp., JPMorgan Chase & Co. and HSBC Holdings Plc.

‘Growth Concerns’

“With Bank Negara signaling to the market that inflation risks have subsided and as growth concerns take centre stage, sagging growth is foreseen in the next year,” said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. “Malaysia will turn to domestic economic consumption as the main growth sustainer until global demand picks up.”

Finance Minister Najib Razak announced the public spending program on Nov. 4 as he predicted economic expansion would slow to an eight-year low of 3.5 percent in 2009 amid the worst global financial crisis since the Great Depression.

It is important that we see “the early implementation of the fiscal stimulus because that will be a major factor that will contribute to sustaining domestic demand,” Governor Zeti said yesterday.

Najib, who is also deputy premier, is due to replace Prime Minister Abdullah Ahmad Badawi next year as head of the ruling coalition, and needs to prevent the economic slowdown from fueling public discontent after the government suffered its worst election result in half a century this March.

Global Slowdown

“Growth is expected to moderate further during the next two quarters in the face of a global downturn,” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore, who expects Malaysia’s economy to expand 2.5 percent next year. “The downside risk is for a more prolonged slowdown.”

Sales by U.S. electronics makers in Malaysia will fall this year and next and the manufacturers will probably have to cut jobs in 2009, Wong Siew Hai, chairman of the American Malaysian Chamber of Commerce’s 17-member electronics industry group, said this week.

“It’s quite serious this time around,” Wong said. Electronics manufacturers are “in cost-control mode” and have delayed their capital investments, he said, predicting more interest-rate cuts by the central bank “to get people to spend, not to save, and to get the costs of business to go down.”

Eng Teknologi Holdings Bhd., the Malaysian maker of hard- disk drives whose clients include Western Digital Corp., said this week orders in the first half of 2009 may fall as much as 20 percent. Genting Bhd., Asia’s largest listed casino operator, slipped into losses last quarter and said the rest of the year will be “challenging” amid the global economic slowdown.

To contact the reporter on this story: Stephanie Phang in Kuala Lumpur at sphang@bloomberg.net

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US Dollar Gains, But Fails to Recoup Week's Losses - US ISM Reports, NFPs Bound to Shake Things Up

Daily Forex Fundamentals | Written by DailyFX | Nov 29 08 06:12 GMT |

Euro Outlook Hinges Upon Key European Central Bank Rate Decision on December 4 British Pound Under Pressure as Markets Forecast 100bp Cut by the Bank of England Next Week US Dollar Gains, But Fails to Recoup Week's Losses - US ISM Reports, NFPs Bound to Shake Things Up The US dollar generally ended the week lower across the majors, but lacked the momentum to yield the breakouts expected amidst the low volume trading typical of US market holidays. On Friday during the European trading session, the greenback jumped but lackluster price action during the US session left the major currency pairs within well-defined ranges. In fact, EUR/USD has held firmly between 1.2425 and 1.3075 since late October, GBP/USD has not been able to break above 1.55 since falling below on November 11, and the USD/JPY remains below falling trendline resistance that has held since mid-October. Looking ahead to the next week, event risk will pick up quite a bit for the greenback. On Monday, ISM Manufacturing is forecasted to slip to a fresh 16-year low of 37.5 from 38.9, and would also mark the fourth straight month that the index held below 50, signaling a contraction in business activity. Manufacturers are facing increasingly rocky times in light of slowdowns in the US and abroad, which is impacting both domestic and foreign demand. On Wednesday, ISM Non-Manufacturing is forecasted to drop to a new record low of 42.0 from 44.4, which will only add to speculation that Q4 GDP will be just as disappointing as the Q3 results, if not more. Last, but not least, US non-farm payrolls on Friday are sure to garner significant attention from the media and traders alike as they are forecasted to fall negative for the 11th straight month and by the most since September 2001. Furthermore, the unemployment rate is anticipated to rise to 6.8 percent - the highest since August 1993 - from already lofty levels of 6.5 percent. It is rather obvious that the markets are expecting a round of pretty disappointing releases, but the big question is: how will the US dollar respond? Last week, the US dollar generally responded to fundamentals reports by falling when data suggested the Federal Reserve would cut rates further. This differs from previous weeks when the greenback responded solely to risk trends, as the currency would rise during times of risk aversion and stock market declines and vice versa. As a result, gauging the impact of risk sentiment on the forex markets will be important at the start of next week since it may determine whether the US dollar will break higher or fall for a deeper retracement. Euro Outlook Hinges Upon Key European Central Bank Rate Decision on December 4 The euro remains under pressure as a record drop in Euro-zone CPI and rising unemployment leaves the odds in favor of rate cut by the European Central Bank next week. In fact, Credit Suisse overnight index swaps are now fully pricing in a 50bp reduction by the ECB, and a 50 percent chance of an even more aggressive 75bp cut. Meanwhile, a Bloomberg News poll shows that economists expect the former. This easily leaves the decision as one of the most important pieces of event risk next week, but traders will also have to look out for comments by ECB President Jean-Claude Trichet during his post-meeting press conference. Mr. Trichet is one of the most opinionated central bank chiefs around, and suggestions that recession will last longer than previously expected in the Euro-zone has the potential to lead EUR/USD below the October 28 low of 1.2329. British Pound Under Pressure as Markets Forecast 100bp Cut by the Bank of England Next Week The British pound continues to consolidate below resistance at 1.55 and like EUR/USD, the GBP/USD outlook hinges upon what the Bank of England does on Thursday, December 4. As it stands, Bloomberg News is forecasting a 100bp reduction while Credit Suisse overnight index swaps are fully pricing in a 75bp cut. This is indeed within the realm of possibilities since the UK has tipped into recession and the BOE, and UK government, anticipate that things will only get worse. In fact, monetary policy action will be just one of many efforts put forth in an attempt to prevent the UK economy from falling into a prolonged recession, as Chancellor of the Exchequer Alistair Darling downgraded growth forecasts during his pre-budget report on November 24 to 0.75 percent in 2008, between -0.75 and -1.25 percent in 2009, and between 1.5 to 2 percent in 2010. Chancellor Darling also announced a £20 billion fiscal stimulus plan, which calls for a cut to the Value Added Tax (VAT) to 15 percent from 17.5 percent, boosts to state pensions and child benefits, extensions of employment support, and a housing support package, among other things. In order to accommodate for some of these costs, Chancellor Darling said that after April 2011 those earning at least £150,000 a year would face an income tax of 45 percent. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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