European Notes Rise for Fourth Week on Signs Slump Is Deepening

By Kim-Mai Cutler

Jan. 10 (Bloomberg) -- European government notes rose for a fourth straight week on signs the recession in the euro region is worsening, giving policy makers more scope to lower interest rates.

The gains pushed the two-year yield to its lowest level in at least 18 years as a government report yesterday showed German industrial production dropped for a third month in November. Bundesbank President Axel Weber signaled Germany’s economy may contract by more than the central bank previously forecast, spurring investors to buy the safest of assets.

“The risk appetite we saw at the beginning of the year is starting to fade,” said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. “Yields are near historic lows.”

The yield on the German two-year note fell eight basis points to 1.51 percent by 4 p.m. in London yesterday, bringing its decline this past week to 22 basis points. It dropped to 1.498 percent, the lowest since at least September 1990. The price of the 2.25 percent security due December 2010 rose 0.15, or 1.5 euros per 1,000-euro ($1,357) face amount, to 101.38.

The 10-year yield declined 11 basis points yesterday to 3.02 percent, leaving it six basis points higher over the past week. Yields move inversely to bond prices.

Bonds stayed higher after a U.S. government report yesterday showed the economy lost more than half a million jobs last month. The Labor Department said payrolls shrank by 524,000 jobs in December, while the unemployment rate rose to 7.2 percent, from 6.8 percent in November.

Yield Spread Widens

Demand for fixed income was also fueled as equity markets in the region slipped for a third time yesterday.

The spread, or difference in yield, between two- and 10-year notes widened to 1.52 percentage points, the most since September 2004, on expectations the European Central Bank will lower borrowing costs next week. The median of 58 economists surveyed by Bloomberg predict the ECB will cut its benchmark rate by half a percentage point to 2 percent on Jan. 15.

“The final quarter of 2008 may have been worse than we expected,” Weber said in the text of a speech delivered in Cologne on Jan. 8. “This would weigh on our growth projections for the current year.”

European retail sales fell 1.5 percent in November from a year-earlier, the European Union’s statistics office in Luxembourg said yesterday.

Ten-year bunds fell in the week on concern debt is flooding the market as governments look to fund bank bailouts and economic stimulus packages. Euro-region governments will issue about 20 billion euros of bonds every week during the first quarter, from a weekly average of 10-to-15 billion over the past two years, according to Societe Generale SA.

German bonds have lost investors 0.7 percent this year, compared with losses of 1.6 percent for gilts and 1.1 percent for U.S. Treasuries, according to Merrill Lynch & Co.’s German Federal Governments, U.K. Gilts and U.S. Treasury Master indexes.

To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net

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Proton Targets India, Middle East to Grow, Business Times Says

By Dinakar Sethuraman

Jan. 10 (Bloomberg) -- Proton Holdings Bhd. may sell more cars overseas and is targeting India, the Middle East and Africa for expansion, the Business Times said, citing company Chairman Nadzmi Mohd Salleh.

The domestic market is not adequate for expansion as the national carmaker requires larger volumes to reduce costs and make better margins, the Malaysian daily said. Proton will be under pressure this year after foreign carmakers offer promotions to sell their stocks, it said.

The company supplies cars to 24 markets including the U.K., Iran, Australia, New Zealand, Indonesia, Singapore, Thailand, Egypt and China, the report said. The company, which sells about 150,000 cars a year in Malaysia, sells fewer than 50,000 overseas.

Malaysian vehicle sales will drop this year as consumer spending falls amid a global recession and carmakers release fewer mass-market models, Frost & Sullivan said on Jan. 6.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net

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U.K. Economy Shrank Most Since 1980, Niesr Data Show

By Svenja O’Donnell

Jan. 10 (Bloomberg) -- The U.K. economy shrank at the fastest pace in almost three decades during the fourth quarter as the recession deepened, the National Institute for Economic and Social Research said.

Gross domestic product fell 1.5 percent in the three months through December, compared with a drop of 0.6 percent in the third quarter, the London-based institute, whose clients include the Treasury and the central bank, estimated in a report today. That would be the worst quarterly contraction since 1980, when Britain was in the grips of a steel workers’ strike.

“The rate of recession increased sharply in the autumn of last year,” Niesr said in a statement. “Since 1955, when quarterly figures were first produced, there have been only five quarters in which output has fallen more.”

Manufacturing extended its worst slump since 1980 in November, according to data released yesterday and factored into Niesr’s estimate. The Bank of England this week cut the benchmark interest rate to 1.5 percent, the lowest since its creation in 1694, in a bid to stem the recession.

Banks are rationing loans, starving households and businesses of credit, exacerbating the property market slump and driving up unemployment. A survey by the U.K. central bank released this month showed that financial institutions plan to constrict credit further, even after the government unveiled a 50 billion-pound ($75 billion) rescue plan last year.

Britain entered a recession in 1980 that was to last five quarters, prompting unemployment to surge. Prime Minister Margaret Thatcher responded to criticisms of a policy U-turn on the economy and her handling of the labor unions by telling the ruling Conservative Party conference in October that year that “the lady’s not for turning.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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European Stocks Rise for Second Week; EADS, Volkswagen Gain

By Daniela Silberstein

Jan. 10 (Bloomberg) -- European stocks climbed for a second week as speculation that government stimulus packages and interest-rate cuts will revive the global economy overshadowed concern earnings will deteriorate.

European Aeronautic, Defence & Space Co. led gains among companies that get more than 20 percent of sales from North America. Volkswagen AG jumped 9.6 percent after Porsche SE boosted its stake in Europe’s largest carmaker. Next Plc, the U.K.’s second-biggest clothes retailer, advanced 8 percent after maintaining its full-year profit forecast.

The Dow Jones Stoxx 600 Index added 1.6 percent to 207.82, completing the first back-to-back weekly gains since July. The gauge has rebounded 14 percent since Nov. 21 on speculation U.S. President-elect Barack Obama will revive the world’s biggest economy with $775 billion of tax cuts and spending, while policy makers lower interest rates to combat the biggest financial crisis since the Great Depression.

“It’s a classic January rally,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees about $615 million. “There’s a lot of cash in the market. Risk aversion has diminished. We’ve had a big confidence crisis. The new president will restore confidence.”

The Stoxx 600 slumped 46 percent last year, the worst annual performance on record, as credit losses and writedowns at financial firms topped $1 trillion and the U.S., Europe and Japan entered simultaneous recessions.

U.S. Unemployment

The measure pared its weekly advance after a report showed U.S. businesses cut 524,000 jobs last month, making last year’s collapse in employment the worst since the end of World War II, while the unemployment rate rose to 7.2 percent, a 15-year high.

National benchmark indexes slipped in nine of the 18 western European markets this week. Germany’s DAX fell 3.8 percent as Commerzbank AG slid 31 percent. France’s CAC 40 lost 1.5 percent, while the U.K.’s FTSE 100 dropped 2.5 percent.

The global recession prompted the Bank of England to reduce its key interest rate to 1.5 percent on Jan. 8, the lowest since the bank was founded in 1694.

Confidence in the economic outlook for Europe fell to the lowest on record and unemployment rose to a two-year high, adding to pressure on the European Central Bank to extend a series of interest-rate cuts that already has seen its key rate fall by 1.75 percentage points to 2.5 percent since October.

EADS, which owns planemaker Airbus SAS, rallied 8.4 percent. SAP AG increased 5.9 percent. The world’s largest maker of business-management software generates about a third of its sales in the Americas.

Volkswagen, Peugeot

Volkswagen surged 9.6 percent. Porsche, which raised its holding to more than 50 percent, said reaching a target 75 percent stake this year will take time as the company pledged to keep enough stock on the market for other investors to trade.

PSA Peugeot Citroen climbed 11 percent, while Renault SA gained 4 percent. The French government is considering further assistance to the country’s biggest carmakers which could take the form of state-backed loans, French daily Les Echos reported.

Next climbed 8 percent. The U.K. retailer said its full-year profit forecast remains “in line” with analysts’ estimates after resisting price cuts before the Christmas holiday and clearing inventory from its stores faster than last year.

Debenhams Plc, the second-largest U.K. department-store company, soared 45 percent as a sales drop slowed on demand for exclusive fashions and debt declined. Marks & Spencer Group Plc gained 11 percent. Britain’s biggest fashion retailer posted a 7.1 percent decline in same-store sales for the fiscal third quarter, less than the 8.3 percent drop forecast by analysts surveyed by Bloomberg.

Commerzbank Slumps

Commerzbank was the worst performer in the Stoxx 600 this week, tumbling 31 percent. Germany’s second-largest lender said it will receive additional capital of 10 billion euros ($13.5 billion) from the country’s Soffin stabilization fund, while the government will take a 25 percent stake in the company.

The injection comes as Commerzbank is nearing the completion of its takeover of Dresdner Bank from Allianz SE.

Deutsche Postbank AG retreated 12 percent. Germany’s biggest consumer bank by clients said it will post a pretax loss for 2008 after capital market deteriorated and it suffered losses from selling stock investments.

Analysts estimate earnings at companies in the Stoxx 600 dropped 16 percent on average last year and will decline 1.2 percent in 2009, according to data compiled by Bloomberg.

Metro AG, Germany’s largest retailer, slid 11 percent. Merrill Lynch & Co. downgraded the stock to “underperform” from “buy,” saying profit will fall by about 4 percent in 2009 as “deflationary pressure” increases.

Carrefour SA, Europe’s biggest retailer, retreated 5.9 percent after Wal-Mart Stores Inc., the world’s largest, said fourth-quarter profit will miss its forecast.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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London's Luxury Home Values Drop in 2008 by the Most on Record

By Simon Packard

Jan. 10 (Bloomberg) -- Luxury home values in central London fell in 2008 by the most in more than three decades as the worst banking crisis since World War I decimated demand from the city's financial professionals.

The average value of a house or apartment in London's nine most expensive neighborhoods fell almost 17 percent last year, according to Knight Frank LLP, which tracks prices dating back to 1976. Values declined 2.2 percent in December, the ninth consecutive monthly drop in an index that mostly covers homes costing at least 1 million pounds ($1.5 million).

Demand for residential property in the U.K. capital has waned amid a worldwide credit crisis that the research firm Oxford Economics estimates could cost London 60,000 jobs in banking, finance and insurance by the end of 2010.

``The market's fortunes will be driven by economic conditions -- especially those in the City,'' said Liam Bailey, Knight Frank's head of residential research, referring to London's main financial district.

Worst hit so far have been homes worth up to 2.5 million pounds, a segment of the market where values fell 22 percent last year. Homes in that tier are favored by financial professionals who have been hit with job losses and ``fears of further job cuts in 2009,'' Bailey said.

London slipped behind Monaco as the world's most expensive market for prime residential real estate last year.

The number of houses and apartments real estate brokers at Knight Frank sold for at least 1 million pounds last year fell 49 percent from 2007's record to 2,746, a level likely to be repeated again this year, the company estimates.

The fall in values, which began in April 2008, will probably reduce prices by 30 percent by the time the real estate slump ends in the second half of this year.

London-based Knight Frank compiles its monthly index from appraised values of properties in the Mayfair, St John's Wood, Regent's Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

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Compal Cuts Target for Notebook Computer Shipments on Recession

By Tim Culpan

Jan. 10 (Bloomberg) -- Compal Electronics Inc., the world’s second-largest maker of notebook computers, cut its shipment forecast for this year as the global economic recession continues to dampen demand.

Compal, which supplies Hewlett-Packard Co. and Acer Inc., expects to ship between 32 million and 35 million laptops this year, down from its earlier estimate of at least 35 million, Gary Lu, chief financial officer of the Taipei-based maker, said today.

By Tim Culpan

Jan. 10 (Bloomberg) -- Compal Electronics Inc., the world’s second-largest maker of notebook computers, cut its shipment forecast for this year as the global economic recession continues to dampen demand.

Compal, which supplies Hewlett-Packard Co. and Acer Inc., expects to ship between 32 million and 35 million laptops this year, down from its earlier estimate of at least 35 million, Gary Lu, chief financial officer of the Taipei-based maker, said today.

Notebook shipments totaled 25.6 million in 2008, Compal reported today, 20 percent fewer than the target it set at the start of the year.

Compal expects to supply 3.4 million to 3.8 million televisions this year, Lu said. It shipped 1.9 million flat- screen televisions last year, mostly 32-inch and 37-inch models on contract for Toshiba Corp. and Hitachi Ltd., as well as 1.9 million computer monitors, Chang Chih-ming, a spokesman for the company, said today.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

Notebook shipments totaled 25.6 million in 2008, Compal reported today, 20 percent fewer than the target it set at the start of the year.

Compal expects to supply 3.4 million to 3.8 million televisions this year, Lu said. It shipped 1.9 million flat- screen televisions last year, mostly 32-inch and 37-inch models on contract for Toshiba Corp. and Hitachi Ltd., as well as 1.9 million computer monitors, Chang Chih-ming, a spokesman for the company, said today.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

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Acer Climbs as ‘Netbook’ Model Helps Keep Margin Firm

By Chinmei Sung

Jan. 10 (Bloomberg) -- Acer Inc., the world’s third-biggest maker of personal computers, climbed from a four-year low in Taipei trading after saying its operating margin may have risen in the final three months of 2008.

Acer gained 2.5 percent to NT$40.70 on the Taiwan Stock Exchange, rising from its lowest since September 2004 as the island’s benchmark Taiex index dropped 0.8 percent.

The company may have benefited from its July introduction of the Aspire One computer, an ultra-compact model that retails for about $400. Global shipments of so-called “netbooks” will probably increase by 11.3 percent this year to about 138 million units from 124 million in 2008, Taipei-based researcher Market Intelligence Center predicted.

“This highlights Acer’s success in capturing consumer needs by offering low-cost laptop computers in the second half when the global economy took a drastic turn in direction,” said Eric Yao, who owns Acer shares in the $152 million funds he helps manage at Truswell Securities Investment Trust Co. in Taipei.

Fourth-quarter operating margin may have bettered or equaled its 2.9 percent third-quarter result, Taipei-based Acer said in a statement after the market closed yesterday.

To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net.

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Mega Financial Fourth-Quarter Profit Falls on Investment Slump

By Janet Ong

Jan. 10 (Bloomberg) -- Mega Financial Holding Co., Taiwan’s third-largest financial company by market capitalization, had a 19 percent drop in fourth-quarter profit as the value of its investments slumped.

Net income at the Taipei-based company fell to NT$3.08 billion ($93 million), from NT$3.8 billion a year earlier. The figure was derived by subtracting nine-month profit from full- year unaudited figures the company released in a statement today.

Mega International Commercial Bank Co., its banking unit, on Dec. 1 booked losses of $6.5 million and 9.56 million euros ($12 million) on the value of overseas investments. The bank in October said it had NT$9 billion of investments linked to Lehman Brothers Holdings Inc., Merrill Lynch & Co. and American International Group Inc. and $47.3 million linked to Iceland- related financial products.

Mega Financial reported that its full-year profit fell 96 percent to NT$711 million, or NT$0.06 a share, from NT$17.1 billion, or NT$1.55 a year earlier.

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

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Japan Government Bonds Complete Weekly Fall on Surge in Sales

By Theresa Barraclough and Yasuhiko Seki

Jan. 10 (Bloomberg) -- Japanese 10-year bonds had the first weekly decline in a month as the government stepped up debt sales to help fund a plan to revive Japan’s economy.

Yields on the securities reached a three-week high as supply concerns hurt demand at an auction of the debt this week. The Ministry of Finance said Dec. 20 it will sell 113.3 trillion yen ($1.24 trillion) of bonds in the year starting April 1, up from a revised 106.3 trillion yen this fiscal year.

“There is a lot of concern surrounding the supply and demand balance given that issuance will increase,” said Tomohiko Katsu, deputy general manager of the capital market division at Shinsei Bank Ltd. in Tokyo. “In the near-term yields will be under rising pressure as investors adjust to the rising supply.”

The yield on the benchmark 10-year bond due December 2018 increased 12.5 basis points this week to 1.29 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The yield on Jan. 8 reached 1.325 percent, the highest since Dec. 17. A basis point is 0.01 percentage point.

Five-year yields rose 5.5 basis points this week to 0.735 percent. Ten-year bond futures for March delivery lost 1.20 this week to 138.92 at the Tokyo Stock Exchange.

The Jan. 8 sale of 1.9 trillion yen in 10-year securities drew bids worth 2.33 times the amount offered, compared with a so-called bid-to-cover ratio of 2.9 times at the prior auction in December.

Prime Minister Taro Aso announced a stimulus package of 10 trillion yen on Dec. 12, doubling a 5 trillion yen plan he announced two months earlier.

Deepening Recession

The decline in bonds this week was limited on speculation three-week high yields attracted investors after President-elect Barack Obama warned the U.S. economy risks sinking deeper into a crisis without more government spending.

The debt ended a four-day slide yesterday as Obama’s comments added to concerns that weakening U.S. demand for Japanese goods will prolong the Asian nation’s first recession since 2001. A government report next week is estimated by economists to show Japan’s machinery orders declined for a second month in November.

“Given the state of the global economy and prospects of monetary policies, there are no reasons to believe that the slump in bonds will be sustained,” said Kazuto Uchida, chief economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo. “The 10-year government bond yield may fall toward 1 percent in the first half of this year.”

Japan’s factory orders, an indicator of capital spending in the next three to six months, declined 8 percent from October, when they slid 4.4 percent, according to the median estimate of economists surveyed by Bloomberg News. The report is due Jan. 15.

Obama highlighted the need for more government spending and a cut in tax rates to overcome the recession as he urged Congress to act quickly on a stimulus package that may total $775 billion.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net.

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Satyam’s Raju Arrested, Board Sacked, in Fraud Probe

By Harichandan Arakali and Kartik Goyal

Jan. 10 (Bloomberg) -- Satyam Computer Services Ltd. chairman Ramalinga Raju and his brother Rama were arrested and the remaining directors of the software exporter sacked as India started investigating an alleged $1 billion fraud.

The brothers were detained on charges including forgery, breach of trust and criminal conspiracy, Inspector General V.S.K. Kaumudi told reporters in the southern city of Hyderabad.

Officials have seized documents and the nation’s accounting body is examining auditor PricewaterhouseCoopers LLC’s local unit, Corporate Affairs Minister Prem Chand Gupta said.

“The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do,” Gupta told reporters in New Delhi. “The government is committed to punish everyone found guilty, including the auditors.”

Satyam, India’s fourth-largest software exporter, plunged for a second day yesterday in Mumbai trading on concern it may run out of money after Raju said he falsified the accounts “for several years.” The scandal, whose scope is being likened to the 2001 bankruptcy of Enron Corp., has shaken confidence in Indian companies and accounting standards.

“The fact that the audited accounts don’t represent true and fair picture raises an issue that is bigger than the Satyam scandal,” said M. Damodaran, former chairman of the Securities and Exchange Board of India. “If some guy has taken liberties with the system, the person or persons has to be identified and punished.”

Bank Statements

The government will obtain records of Satyam’s financial transactions from banks, minister Gupta said in televised comments after the Times of India newspaper reported today that the company’s bank statements were missing.

Houston-based Enron’s 2001 bankruptcy wiped out more than 5,000 jobs and $1 billion in employee retirement funds. The Enron scandal triggered tougher U.S. accounting rules and the creation of a board to oversee auditing firms that review the financial statements of publicly traded companies.

Ten directors nominated by the government will meet next week to appoint managers at Hyderabad-based Satyam, Gupta said.

Satyam canceled a board meeting scheduled for today after the board was replaced, it said in an e-mailed statement.

Interim Chief Executive Officer Ram Mynampati said Jan. 8 he was unaware of the false accounting that may force Satyam to restate earnings as he relied on audited statements. The local unit of PwC said in a statement the same day Satyam’s accounts were supported by “appropriate audit evidence.”

Eroded Wealth

The scandal has eroded $2.2 billion in shareholder wealth, drawing calls from executives and auditors to accelerate the investigation. More than two days after chairman Raju claimed he’d padded Satyam’s books, the company’s auditors and interim management had yet to confirm any irregularities.

Satyam fell 17.35 rupees to 22.9 rupees yesterday. The Bombay Stock Exchange removed Satyam from its benchmark Sensitive index, a day after the National Stock Exchange dropped the stock from the Nifty.

The company was sued by investors in at least three class- action lawsuits in federal court in the U.S. after the shares in Mumbai plunged. Satyam’s American depositary receipts, each of which represents two ordinary shares, fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange on Jan. 7, when trading was halted.

Turning Point

“We believe the Satyam incident marks a turning point in investors’ attitude toward corporate governance,” Suresh Mahadevan, an analyst at UBS AG, said. “In future, companies perceived poor on corporate governance or following aggressive accounting practices will trade at larger discounts compared to their peer group.”

India’s stock market regulator plans to review working papers of auditors at companies forming the nation’s main stock indexes, the regulator said in a statement in Mumbai. The Securities and Exchange Board’s Committee on Disclosures and Accounting Standards will hold a peer review of the auditor’s working papers on quarterly and full-year financial statements.

Raju had planned to meet investigators from the Securities and Exchange Board today, his lawyer S. Bharat Kumar said before the arrests. Raju had been summoned by regulators yesterday though wasn’t given sufficient notice, he said.

Raju, 54, and his younger brother will be produced before a magistrate within 24 hours, inspector general Kaumudi said. The offences carry a maximum sentence of 10 years and the brothers can’t apply for bail, he said.

Government officials have seized Satyam’s documents and a team from the ministry of corporate affairs has started inspecting eight group companies, Gupta said.

Prime Concern

“It’s the prime concern of the government to ensure the operations of the company continue uninterrupted,” Gupta said.

Satyam employs about 53,000 people and has offices from the U.S. to the U.K., Brazil and Australia. The company writes software and manages computer systems for clients including ArcelorMittal, the world’s largest steelmaker, and Nissan Motor Co., Japan’s third-biggest carmaker.

The announcement by the government to reconstitute the Satyam board will also reinforce employee and stakeholder confidence, the National Association of Software and Service Companies, a lobby group, said in an e-mailed statement.

‘Buy Satyam’

Outside the group’s corporate headquarters, four canvas sheets about 6 feet by 8 feet are draped with employees’ signatures, handprints and messages.

“Satyam will come back,” one message reads. “Save Satyam, save Raju,” says another. A third, “Buy Satyam Stock.” On each of the red, green, yellow and blue-painted canvases is printed “The Spirit of Satyam,” like a watermark.

“This current management needs to go so that the 50,000 jobs are saved and client commitments are kept,” Richard Rekhy, chief operating officer of KPMG in India, said. “It is the image of India and corporate India at stake.”

The fall of Raju, named Ernst & Young Entrepreneur of the Year in 2007, began three weeks ago when Satyam proposed paying $1.6 billion for Maytas Properties Ltd. and Maytas Infra Ltd., both tied to his family. The plan was scrapped 12 hours later, after investors called it a “woeful misuse of cash.” Raju said the sale was designed to plug the hole in Satyam’s balance sheet.

“To my non-auditor mind it is reasonably clear that something like this could not have been hidden from audit for so long,” former regulator Damodaran said.

To contact the reporters on this story: Harichandan Arakali in Bangalore at harakali@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

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Satyam Sued by Investors in Three U.S. Lawsuits Over Fraud

By Thom Weidlich

Jan. 10 (Bloomberg) -- Satyam Computer Services Ltd. was sued by investors in at least three class-action lawsuits in federal court in the U.S. after its shares in Mumbai plunged to record lows when its chairman said he falsified accounts.

Hossein Momenzadeh, who bought 75 shares of the Indian software company’s American depositary receipts in July 2007 at $26.50 each, sued Jan. 8 on behalf of all purchasers of the ADRs from January 2004 to January 2009. Aekta Ben Patel, who bought 100 shares in July 2007 at $27 each, sued Jan. 7, the day Satyam Chairman Ramalinga Raju revealed the fraud.

“When the truth was revealed,” the ADRs “lost nearly their entire value,” Momenzadeh’s lawyers wrote in his complaint.

In a letter to directors, Raju said he falsified the accounts “for several years” and quit. The scandal has eroded $2.2 billion in shareholder wealth. Raju and his brother Rama were arrested yesterday and the remaining directors of the software exporter were fired, as India started investigating an alleged $1 billion fraud.

Melissa Baratta, a spokeswoman for Hyderabad-based Satyam in New York, declined to comment. “At this point we really can’t speak to anything beyond what the company has already made public,” she said.

The ADRs, each of which represents two ordinary Satyam shares, fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange on Jan. 7, when trading was halted.

PricewaterhouseCoopers

An additional investor class action, or group lawsuit, was filed yesterday in federal court in San Jose, California, naming Satyam as well as auditor PricewaterhouseCoopers. David Nestor, a spokesman for the accounting firm, said he hadn’t seen the lawsuit and couldn’t comment on it.

Kenneth Vianale, one of Patel’s lawyers, said his firm was already investigating Satyam.

“We were gearing up to sue them before this news hit,” he said yesterday in a phone interview. “There was other stuff that caught our notice. They had a big stock-price drop in December.”

On Dec. 16, the ADRs fell a record 55 percent to $5.70 after shareholder objections led the company to scrap a plan to spend $1.6 billion buying two companies owned by Raju’s family.

The shareholders face difficulty recouping their investments, said Shaalu Mehra, the Menlo Park, California-based chairman of the law firm Perkins Coie’s outsourcing and India practices.

‘Kill Any Viability’

“The indications are that Satyam isn’t going to have sufficient cash reserves to make it to the end of the month,” Mehra said in a phone interview. “The mass departure of their customers is going to kill any viability that they had.”

Robert Harwood, one of Momenzadeh’s lawyers, said he’s been contacted by “a number of other people with some significant shareholdings” in Satyam. “They’re quite unhappy,” said Harwood, of Harwood Feffer in New York.

The New York cases are Patel v. Satyam Computer Services Ltd., 09-cv-93, and Momenzadeh v. Satyam Computer Services Ltd., 09-cv-161, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

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Lloyds TSB to Pay $350 Million to Settle Prove of Transfers

By Karen Freifeld

Jan. 10 (Bloomberg) -- Lloyds TSB Bank Plc, accused of allowing Iran and Sudan illegal access to the U.S. financial system, will pay $350 million to settle an investigation by Manhattan District Attorney Robert Morgenthau.

Lloyds admitted it altered wire transfer information to hide the identity of its clients, Morgenthau said. The bank must provide financial information on the transactions, according to a deferred prosecution agreement. Charges can still be pursued if the bank knowingly transmitted funds to or from terrorists.

“This is the largest penalty by far for a violation of U.S. sanctions,” Morgenthau told reporters in his offices yesterday.

U.S. banks have software filters that look for entities barred from doing business in the states, prosecutors said. Lloyds stripped out identifying features on the wires so the filters wouldn’t catch them. The transactions appear to be from Lloyds rather than, for example, Iranian Bank Melli and its customers.

He said $350 million in the funds sent by Lloyds terminated in the U.S. and “several billion” dollars went through U.S. banks in violation of U.S. law.

“Why would Lloyds do this?” he asked. “I think the answer is banks want deposits.”

Morgenthau said nine other major foreign banks have been using the same technique to disguise illegal money transfers. He declined to name the banks. The investigation is continuing.

Lloyds cooperated with Morgenthau’s office and the U.S. Justice Department, which joined in the probe, according to a Lloyds statement. Lloyds is in talks with the U.S. Office of Foreign Assets Control about the matter and doesn’t expect it will have to make any additional payments, according to the statement.

Compliance Programs

“We are committed to running our business with the highest levels of integrity and regulatory compliance across all of our operations and have undertaken a range of significant steps to further enhance our compliance programs,” Lloyds said in the statement.

The prosecution of the bank will end if Lloyds fulfills all requirements of the agreement, as well as a separate one with the federal government, over the next two years.

In the New York agreement, Lloyds admitted that from 2001 to 2004 it allowed Iranian banks and their customers to move more than $300 million by stripping information. The Iranian banks included Bank Melli, Bank Saderat and Sepah Bank, according to a statement by Morgenthau.

Sudanese Clients

Lloyds later allowed Sudanese clients to illegally transfer more than $20 million dollars, ending in 2007, according to Morgenthau.

In addition to the Sudanese and Iranian transactions, Lloyds between 2002 and 2004 processed $20 million for a Libyan customer, according to the agreement.

In one internal document, Lloyds said transactions from the London branches of Iranian banks should be processed in “the normal way,” which meant removing information that would tie them to Iran, according to the agreement. Lloyds eventually dedicated specific employees to scrubbing the Iranian transactions, the agreement said.

Over 12 years, “about $350 million was allowed to move through the U.S. financial system that at a minimum should have been scrutinized,” Matthew Friedrich, acting assistant attorney general of the Justice Department’s Criminal Division, told reporters yesterday in Washington.

Nine Months

Over the next nine months, Lloyds has agreed to provide financial information on the transactions, Friedrich said. The vast majority of information already has been turned over, the Justice Department said.

“We can look at where did this money go, where was it sent from and we can do the scrutiny that should have been performed in the first place,” he said.

One of the main questions U.S. authorities will focus on is whether any of the money funded terrorism, Friedrich said.

Most of the money was sent from accounts from a blacklisted country to a U.S. account, he said.

This is the first criminal action the Department of Justice has taken to address “stripping,” DOJ spokeswoman Laura Sweeney said in an e-mail, though she said in 2005 Dutch bank ABN Amro was fined by the U.S. Department of Treasury for similar conduct.

According to the agreement, Lloyds falsified or deleted information on outgoing U.S. dollar messages that involved sanctioned countries from the mid 1990s through January 2007.

Heightened Efforts

In 2002, bank officials became concerned with these practices because of heightened U.S. efforts to enforce financial sanctions and ended them with regard to Iranian banks in 2004.

Lloyds had relationships with the biggest Iranian banks and their UK units, including Bank Melli, Bank Sepah, Bank Tejerat, Bank Mellat, Bank Saderat and the Iranian Overseas Investment Bank.

U.S. laws bar the transfer of funds from Iran and other sanctioned countries without authorization by the U.S. Treasury Department. Assistant District Attorney Adam Kaufman said the bank’s conduct didn’t necessarily violate laws in the U.K., where Lloyds is based.

Last month, federal prosecutors in the U.S. sued to gain control of a 36-story Manhattan office tower they claim belongs to the Iranian government’s Bank Melli. Farhsid Jahedi, President of the Alavi Foundation that owns a 60 percent stake in the tower, also was arrested for destroying documents.

To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net.

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Rand Posts Biggest 5-Day Drop Since October on Growth Concern

By Garth Theunissen

Jan. 10 (Bloomberg) -- South Africa’s rand posted its biggest weekly drop in 2 1/2 months after manufacturing sank the most in nine years and house prices grew the least in 12 years, more signs the continent’s largest economy is slowing.

The rand had its steepest five-day drop since Oct. 24 after U.S. jobless reports showed the world’s biggest economy shed the most jobs since the end of World War II, highlighting the severity of the country’s recession.

“The declining global growth story and the negative impact it’s having on the domestic economy is what’s driving rand negativity,” said Natheem Alexander, a bond and currency trader at Peregrine Quant, a hedge fund in Cape Town. “Poor growth tends to translate into currency weakness.”

The rand traded at 9.7378 per dollar as of 5 p.m. in Johannesburg Jan. 9, from 9.3147 on Jan. 2, taking its weekly decline to 4.5 percent. It also slipped versus all 16 most- actively traded currencies monitored by Bloomberg this past week, depreciating 1.5 percent against the euro to 13.1637.

Factory output, which accounts for 16 percent of South Africa’s $278 billion economy, contracted for a second straight month in November, slumping 4.4 percent, Pretoria-based Statistics South Africa said this week. Manufacturers including ArcelorMittal South Africa Ltd., the country’s biggest steel producer, are scaling back output on lower demand.

South African house-price growth slid to 3.8 percent in 2008, the slowest in 12 years, as interest rates at a five-year high hurt consumers, mortgage lender Absa Group Ltd. said. Growth in nominal house prices eased from 14.5 percent in 2007, Absa said.

‘Big Influence’

In the U.S., the decline in payrolls was in line with forecasts, bringing job losses for 2008 to 2.589 million, the most since 1945, according to a Labor Department report in Washington. The jobless rate rose more than forecast to 7.2 percent, a 15-year high, from 6.8 percent.

A separate report showed the total number of Americans receiving unemployment benefits advanced to 4.6 million, the most since 1982,

“The world’s biggest economy is in trouble and that’s going to have a big impact on the outlook for emerging-market growth prospects,” Alexander said.

The currency will extend last year’s 28 percent slump in 2009, declining to 10.50 per dollar by year-end as the global financial crisis restricts South Africa’s ability to lure foreign capital and a drop in commodity prices cuts export revenue, Rand Merchant Bank predicted in a client note.

Platinum, which competes with gold as the country’s biggest export earner, has slumped almost 60 percent from its March high.

South African government bonds fell this week, with the yield on the 13.5 percent security due September 2015 gaining 26 basis points from Jan. 2 to 7.48 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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Saudi Supertanker Freed by Somali Pirates, Owner Says

By Glen Carey

Jan. 10 (Bloomberg) -- The Saudi Arabian oil supertanker Sirius Star, which was hijacked by Somali pirates in November in the Indian Ocean, has been released, its owner said.

All crewmembers are safe and in good health, state-owned Vela International Ltd. said today in an e-mailed statement. The Sirius Star contains 2 million barrels of crude oil.

The tanker, which was hijacked Nov. 15 about 420 nautical miles (780 kilometers) off Somalia, was the largest ship and the farthest from shore of the 43 vessels that Somali pirates seized last year. Concerns that piracy could endanger energy supplies has been cited by governments such as France as a reason for sending warships to the waters off Somalia.

The pirates who commandeered the oil tanker appear to have received payment to release the ship, the U.S. Navy said yesterday. Press photographs showed an object being parachuted onto the vessel.

A Vela spokesman declined to comment on whether a ransom was paid to free the ship when contacted by telephone today. It is company policy not to identify the spokesman.

Five of the pirates drowned with their share of a reported $3 million ransom after their small boat capsized, the Associated Press reported. Pirate Daud Nure said a boat with eight people on board overturned in a storm after dozens of pirates left the Sirius Star, according to the news agency.

Weapons Destroyed

The Sirius Star is now leaving Somalia’s territorial waters, the Saudi Press Agency reported today, citing Oil Minister Ali Naimi.

Pirates attacked 165 ships off the coast of Somalia last year, up from 58 attacks in 2007, the French military says.

In response, the European Union in December launched its first naval mission to Somalia. The EU fleet, named Atalanta, saw its first action Dec. 27 when a helicopter from German frigate FDS Karlsruhe chased off pirates attacking an Egyptian bulk carrier and then destroyed their weapons.

Task Force 150, a Bahrain-based 20-country multinational fleet that’s supporting U.S.-led operations in Afghanistan, said Jan. 8 it’s spinning off some of its warships to create Task Force 151, which will concentrate on suppressing piracy.

The United Nations Security Council voted 15-0 last month to allow naval forces in the area to “take all necessary measures” to fight pirates.

The Gulf of Aden, where most of the attacks take place, is transited by 50 ships a day on their way to or from the Suez Canal. About 30 percent of Europe’s oil supply, or 3.5 million barrels a day, passes through the canal.

Other countries, including China, India, Malaysia and Russia, have sent warships to protect their merchant vessels.

U.S. and Russian warships continue to track a Ukrainian boat containing T-72 battle tanks that pirates hijacked Sept. 25.

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net

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South Africa’s ANC Pledges Spending Boost, More Jobs

By Mike Cohen

Jan. 10 (Bloomberg) -- South Africa’s ruling African National Congress hit the campaign trial today, pledging to lower the country’s 23 percent unemployment rate and raise spending on health, education and grants for poor children.

ANC supporters from Eastern Cape Province were bused into the southeastern city of East London for the presentation of an election manifesto, filling the 30,000-seat Absa rugby stadium. The event, which coincided with 97th anniversary celebrations of Africa’s oldest political movement, was also beamed onto a giant screen in a nearby cricket stadium and broadcast on national television.

“The developmental state will play a central and strategic role in the economy,” the ANC said in the document. “Fiscal and monetary policy mandates, including management of interest rates and exchange rates, need to actively promote creation of decent employment, economic growth, broad-based industrialization, reduced income inequality and other developmental imperatives.”

The ANC, which led the fight against apartheid and took power under Nelson Mandela in 1994, won almost 70 percent of the vote in the last elections five years ago. Rivals this year include the Congress of the People, led by former Defense Minister Mosiuoa Lekota and several other veterans of the fight against racial segregation.

Zuma Leadership

The ANC split after Jacob Zuma, 66, ousted Thabo Mbeki as party leader in December 2007. The ANC forced Mbeki to step down as the nation’s president in September, and temporarily replaced him with its deputy leader Kgalema Motlanthe until Zuma is eligible to take over after the poll.

“We can now say with confidence that much has been done in addressing the legacy of apartheid over the last 15 years, that much more remains to be done and that working together, we can do more,” Zuma said. “We will retain those strategies and practices that have been successful, but will change or improve those that have not delivered optimal results.”

Labor unionists and communists, who form part of South Africa’s ruling alliance and backed Zuma’s rise to power, have been pushing for lower interest rates. They also want the central bank, whose sole mandate is to control inflation and protect the value of the currency, to consider how interest rate changes will affect growth and unemployment.

The ANC doesn’t intend to scrap inflation targeting or change the central bank’s mandate, party spokeswoman Jessie Duarte said. “Those policies will stay.”

Labor Desires

The ANC “has to intensify the process of change so that it benefits the masses of our people,” Zwelinzima Vavi, secretary- general of the Congress of South African Trade Unions, the country’s largest labor federation, said at the rally. The government should not “continue with failed economic and discredited policies. The elected leadership should also not forget that they serve at the behest of the people and shall be removed if they stray from the mandate.”

The ANC’s other election promises include bolstering development in rural areas and increasing the size of the police force to combat crime in a country where on average more than 50 murders are committed each day. The party also intends to extend support grants to children who are 15 to 18 years old. About 8 million young people already receive the grants.

Land redistribution programs will be stepped up “to ensure more land is in the hands of the rural poor,” the manifesto says. “The government will work toward free and compulsory education for all children. As an immediate step it will ensure at least 60 percent of schools are no-fee schools.”

Taxes Versus Debt

While the ANC manifesto contains scant detail on how the party will fund its promises, policy chief Jeff Radebe has said taxes won’t be increased, raising the prospect of increased government borrowing.

“Although many of these initiatives will be phased in, with some further allocations likely in the Feb. 11 budget statement, the rising social welfare payments will still raise concerns over the fiscal implications,” said Mike Davies, an analyst an Eurasia Group in London.

The ANC’s track record in government indicates it’s unlikely to implement the election promises, said Helen Zille, leader of the Democratic Alliance, the main opposition party.

“Manifestos are not always the best guide to a party’s philosophy or policies because there is often a vast difference between what they say and what they do,” she said in a Jan. 9 statement.

Mbeki, 66, did not attend today’s rally.

While Mandela, who turned 90 last year, has pledged support for the ANC in the election, he has declined to campaign actively or seek to reunite the party.

“I have chosen, and made that publicly known, not to become involved in those or other political matters,” Mandela said in a statement read by his daughter Zindzi. “It is the task of a new generation to lead and take responsibility.”

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net;

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Russian Gas Flows Still Halted Amid Monitoring Delays

By Maria Ermakova and Kateryna Choursina

Jan. 10 (Bloomberg) -- Russian natural-gas shipments through Ukraine to Europe were suspended for a fourth day amid delays in signing an agreement to deploy international monitors.

Czech Prime Minister Mirek Topolanek, who holds the European Union’s presidency, will visit Moscow today to persuade Russia to resume gas shipments. OAO Gazprom Chief Executive Officer Alexei Miller said supplies won’t be restored until a document has been signed and monitors are in place.

Natural-gas prices in the U.K., Europe’s largest market, initially fell on speculation gas could soon be flowing again through Ukraine after EU officials brokered a deal on Jan. 8 between both sides. Gazprom halted transit flows on Jan. 7 after accusing Ukraine of diverting gas intended for other buyers for its own use, a charge denied by the country.

“Europe has seen its dependence on Russia,” said Stephan Thomas, a fund manager at Frankfurt Trust Investment GmbH. “It highlights our need of a pipeline through the Baltic Sea to diversify our supplies.”

The first three EU monitors of a group of 22 arrived in Ukraine’s capital just before 5 p.m. local time, David Stulik, a spokesman for the European Commission delegation in Kiev, said by telephone. There’s no definite schedule for the visit yet and its duration is unknown, he added.

The monitoring team will consist of 18 experts from Europe’s main gas companies and four “high-ranking” European Commission officials, according to Stulik.

‘Imperative’

Russia, Ukraine and the EU struck a deal Jan. 8 on monitoring gas flows, paving the way for the resumption of deliveries to the 27-nation bloc. The EU said it’s “imperative” that shipments resume “without any further delay” after the three parties agreed on the details of the mission, though it hasn’t been signed by all parties yet.

“As soon as the document is signed and the commission’s representatives begin work at Ukrainian and Russian gas measuring stations, transit will become possible,” Miller told reporters in Sochi, Russia yesterday.

Once Russia restarts shipments, it will take up to three days for Russian gas to reach European consumers, the EU said. Russia halted shipments intended for Ukraine’s domestic market Jan. 1.

Supply Shortfalls

Gazprom’s European customers receive 80 percent of supplies through pipelines that cross Ukraine. The Russian exporter, which provides a quarter of Europe’s gas, said its overall deliveries to Europe were cut by about 60 percent on Jan. 7.

The gas crisis is “unprecedented” in European history, the EU said yesterday.

Bulgaria, Hungary and Slovakia were among eastern European countries that maintained curbs on gas use yesterday. Most countries in western Europe have suffered less from the cutoff, tapping stockpiles and sourcing alternative supplies to satisfy demand.

E.ON AG, Germany’s biggest utility, is in charge of the technical side of the monitoring, Kai Krischnak, a spokesman for the company’s Essen-based gas unit, said yesterday by phone. Germany is Russia’s biggest foreign gas customer.

RWE Transgas, the Czech Republic’s biggest gas trader, said it has sent an observer to join the monitoring team while OMV AG, Austria’s largest oil and gas company, is sending two.

GDF Suez SA said it will send four technicians while Italian Industry Minister Claudio Scajola said representatives of Eni SpA will also join the group.

No Progress

Gazprom spokesman Sergei Kupriyanov said the agreement governing the monitoring group has not yet been signed. “Until the protocol is signed by all sides, these specialists do not have the status of observers,” he said.

Miller said yesterday that no progress has been made in talks with Ukraine over gas prices and fees, at the center of the disagreement that has hit supplies to at least 20 nations.

“Talks have resumed but there is an impression that the Ukrainian participants don’t have any mandate, any authority” to discuss price levels for 2009 or volumes of gas purchases, he told Russian President Dmitry Medvedev yesterday. “We don’t see any readiness of Ukrainian participants in talks for signing the contract.”

Ukrainian President Viktor Yushchenko told reporters in Kiev yesterday Ukraine favors applying market prices for Russian gas. “The earlier we switch to market prices for gas, for transit and for storage, the better it is for Russia and Ukraine,” he said at a briefing after a meeting with Topolanek.

IMF Bailout

The standoff comes as Ukraine’s leaders, Yushchenko and Prime Minister Yulia Timoshenko, are facing a financial crisis that has forced them to seek a $16.4 billion International Monetary Fund bailout.

Neil Shearing, an emerging-markets economist at Capital Economics Ltd., said higher gas prices could deepen the country’s recession. “Given that gross domestic product is already set to contract by more than 5 percent this year, the implications for the real economy would be catastrophic,” Shearing said in an e-mailed note.

Russian Prime Minister Vladimir Putin said on Jan. 8 Russia would be prepared to double the fee it pays to send gas through Ukraine, if its neighbor paid market prices for supplies. Russia would be ready to pay $3.40 per 1,000 cubic meters of gas over 100 kilometers (62 miles), up from $1.70, Putin told reporters at his residence near Moscow, without specifying a timetable.

Gazprom had raised its demands on Jan. 4 as Miller cited a possible price of $450 per 1,000 cubic meters for deliveries to Ukraine, reflecting the average price in countries bordering Russia’s neighbor. Ukraine, which paid $179.50 for Russian gas last year, rejected a Gazprom offer last week of $250 for 2009 and said then $201 would be fair.

Gas Market

Gazprom says it is still owed $615 million by Ukraine. Yushchenko said yesterday Ukraine has paid for all the gas it received in 2008.

U.K. natural-gas for the week ahead declined after the deal on monitors was reached. Week-ahead gas fell as much as 1.75 pence, or 2.9 percent, to 58.50 pence a therm, according to broker ICAP Plc.

In 2006, Russia turned off all Ukrainian gas exports for three days, causing volumes to fall in the EU, and also cut shipments by 50 percent last March during a debt spat.

To contact the reporters on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net. Kateryna Choursina in Kiev at kchoursina@bloomberg.net

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Asian Currencies: Ringgit, Singapore Dollar Decline During Week

By Lilian Karunungan and David Yong

Jan. 10 (Bloomberg) -- Most Asian currencies dropped this week, led by the Malaysian ringgit and the Singapore dollar, on concern investors will exit emerging markets amid signs a global recession is deepening.

The ringgit had its biggest weekly loss against the U.S. currency since June 2007 after reports showed industrial output fell the most since 2004 and exports had their biggest slide in almost seven years. Singapore’s dollar completed its worst week since October after the government said the economy may shrink more than previously forecast.

“We haven’t seen the trough yet in terms of the declining economic trends,” said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. “The ringgit may be susceptible to short-term fund outflows.”

The ringgit traded at 3.5445 per dollar as of 4:11 p.m. yesterday in Kuala Lumpur, down 2.2 percent from 3.4662 at the end of last week, according to data compiled by Bloomberg. The Singapore dollar slid 1.7 percent to S$1.4782. The South Korean won, which lost 26 percent last year, Asia’s worst performance, slid 1.6 percent this week to 1,343.

Malaysia’s industrial production dropped 7.7 percent from a year earlier in November after a revised 2.9 percent decline the previous month, the government reported yesterday. Exports fell 4.9 percent in November, data earlier in the week showed.

China, the world’s fourth-largest economy, will next week report a 5.3 percent slide in overseas sales for December, according to the median estimate of economists surveyed by Bloomberg News. That would be the largest decrease in more than a decade.

Deepening Recession

Singapore’s economy is forecast by the government to shrink as much as 2 percent this year, twice the pace of a November prediction. Growth was 1.5 percent in 2008, the slowest in seven years.

The U.S. dollar headed for its first weekly loss against the yen in three weeks as reports showed a shrinking labor market. The currency traded at 91.14 yen in Tokyo, versus 91.83 at the end of last week and 91.20 late in New York on Jan. 8.

South Korea’s won weakened to the lowest level in 2009 after the central bank cut interest rates to a record to revive growth in Asia’s fourth-largest economy.

Rate Cuts

The Korean currency fell for a third week as a retreat in local stocks prompted foreign investors to sell more shares than they bought for a second day, according to Korea Exchange. The Bank of Korea trimmed its seven-day repurchase rate by half a percentage point to 2.5 percent yesterday, the fifth reduction since the start of the last quarter. The Bank of Thailand will probably join Korea, Indonesia and Taiwan in lowering borrowing costs when policy makers meet on Jan. 14, according to a Bloomberg News survey of economists.

“Those who were betting on bigger rate cuts are disappointed,” said Oh Suk Tae, an economist with Citigroup Inc. in Seoul. “It’s premature to talk about a floor, or recovery for the markets and the economy.”

The Kospi index lost 2 percent, sliding for a second day. The economy is “deteriorating rapidly” as demand cools faster than expected at home and abroad, the central bank said in a statement yesterday. Exports declined for a second straight month in December.

Elsewhere, the Indonesian rupiah gained 1 percent this week to 11,020 per dollar, the Thai baht fell 0.1 percent to 34.83 and the Philippine peso advanced 0.8 percent to 47.14. The Taiwan dollar was at NT$33.155, weakening from NT$32.86 on Dec. 31, the island’s last trading day before this week. Vietnam’s dong was at 17,476 compared with 17,483 at the end of last week.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.

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Asian Stocks Fall as Recession Erodes Profits; Satyam Tumbles

By Chua Kong Ho

Jan. 10 (Bloomberg) -- Asian stocks fell in the first week of 2009, extending last year’s rout, as the global recession cut earnings while Satyam Computer Services Ltd.’s false accounting rocked confidence in India’s corporate governance.

Lenovo Group Ltd. slumped 21 percent in Hong Kong after the personal computer maker forecast its first loss in three years. Shanghai Electric Group Co., China’s largest maker of power equipment, fell 18 percent after warning that 2008’s profit may miss its forecast. Satyam, India’s fourth-largest software- services provider, plunged 87 percent after the chairman said he inflated assets by $1 billion. India’s Sensitive Index led regional gauges lower.

“As we enter the earnings season, no good news can be expected,” said Yoji Takeda, managing about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Actual numbers and forecasts are likely to be even worse than investors expect.”

The MSCI Asia Pacific Index slid 0.3 percent to 89.85. The index fell 43 percent last year, the biggest annual loss on record, as the global economy sank into recession, hurting demand and forcing companies to cut jobs as profits slump.

Japan’s Nikkei 225 Stock Average fell 0.3 percent, snapping a four-week rally. South Korea’s Kospi Index ended the week 2 percent higher after the central bank cut interest rates to a record low, saying the economy is deteriorating “rapidly.”

Lenovo, Asustek

Lenovo, which bought International Business Machines Corp.’s PC division in 2005, fell 21 percent to HK$1.73. The PC maker expects to post a “material loss” in the quarter ended Dec. 31, the company said in a Jan. 8 statement. Lenovo will eliminate about 2,500 jobs, or about 11 percent of its entire workforce, leading to savings of about $300 million in the year ending March 2010, according to the statement.

Asustek Computer Inc., the world’s largest supplier of boards that connect computer components, lost 9.2 percent to NT$33.4 after saying it expects to post a loss in its Asus brand unit on lower-than-expected demand, excess inventories and currency fluctuations. Macquarie Group Ltd. and Credit Suisse Group cut the company’s rating to “underperform” from “neutral.”

Shanghai Electric slipped 18 percent to HK$2.66 after saying profit may be as much as 13 percent less than the 2.97 billion yuan ($434 million) forecast in November because customers asked for a delay in deliveries.

Satyam, India

Satyam Computer tumbled 87 percent to 23.75 rupees, the steepest drop on MSCI’s regional index, after Chairman Ramalinga Raju said Jan. 7 that he had falsified accounts and quit. Interim Chief Executive Officer Ram Mynampati said he can’t be sure whether the company has enough cash for this month. The statement prompted concern that other companies may disclose one-off items when they announce earnings over coming weeks.

DLF Ltd., India’s biggest real-estate developer, declined 28 percent to 216 rupees. Reliance Communications Ltd., the country’s second-largest mobile-phone company, fell 26 percent to 186.85 rupees. Jaiprakash Associates Ltd., India’s biggest builder of dams, slumped 22 percent to 68.5 rupees.

“We believe the Satyam incident marks a turning point in investors’ attitude towards corporate governance,” UBS AG analyst Suresh Mahadevan wrote in a Jan. 9 note.

Bumi, Indonesia

In Indonesia, PT Bumi Resources fell 31 percent to 630 rupiahs. BNP Paribas SA and PT Samuel Sekuritas followed JPMorgan Chase & Co., CLSA Ltd. and CIMB-GK Securities Pte. in downgrading their ratings on the stock, saying Asia’s largest power-station coal exporter was overpaying for acquisitions. Bumi announced this week three acquisitions valued at $565 million in total, raising concern the company will have to increase its debt.

Among stocks that rose, Sharp Corp., the world’s second- largest solar-battery maker, leapt 30 percent to 827 yen after saying Jan. 7 it will start producing solar panels early next year at a plant now under construction to meet growing demand.

Woori Finance Holdings Co. gained 23 percent to 7,700 won in Seoul. Its unit Woori Bank plans to seek about 3 trillion yuan ($2.3 billion) from a government-initiated fund to boost capital, the Korea Economic Daily reported Jan. 6.

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

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