Investors count Centro losses as rivals eye assets
20 December 2007
MELBOURNE (Reuters) - Some of Australia's top fund managers face big losses from the this week's 80 percent slump in Centro Properties Group shares, as several of the mall operator's rivals begin to scan its assets for possible purchases.
Centro, which owns 700 shopping malls in the United States, has lost some A$4.5 billion ($3.8 billion) in market value after it revealed that it and its affiliates were having trouble refinancing A$3.9 billion in debt due to the global credit crunch.
Documents filed with the Australian Securities and Investment Commission show that Barclays unit Barclays Global Investors Australia, Colonial First State, and UBS Asset Management all held stakes of over 5 percent in Centro.
"It was a concentrated register. When you see the end of month performance numbers, you'll see it's had an enormous negative impact on those who owned it. Bonuses will be on the line," said BT Investment Management portfolio manager Jack Chemello.
"The demise of Centro is going to be a defining event in property investment in Australia, between those who got it right and those who got it wrong."
Centro shares fell as much as 86 percent to an all-time low of $0.42 on Tuesday, before recovering to $0.80. They have since risen to A$1.32 at Thursday's close after the company said it was still viable and did not have to sell assets. It has to renegotiate some debt facilities by a mid-February deadline.
Colonial, the wealth management arm of Commonwealth Bank of Australia Ltd, said it had a 12.18 percent stake in Centro as at December 12, across a large number of funds.
The stake was worth A$587 million on December 12. If unchanged, it would now be worth less than a quarter of that -- about A$136 million -- based on Centro's last traded price.
A Colonial spokeswoman declined to comment on the specific value of the stake.
LOST VALUE
Barclays' Australian arm raised its Centro stake on December 4 to 9.3 percent, worth some A$568 million then. The stake would have been worth A$103 million on Thursday. Barclays did not return calls seeking comment.
UBS Asset Management said its stake in Centro on December 13 was 5.09 percent, worth A$258 million. That compares with A$57 million as of Thursday. UBS confirmed the shareholding on Thursday, but declined to comment further.
Close to 90 percent of the shares on issue have been traded in the past four days.
Australia's big banks have declined to comment on reports about their exposure to Centro. Local media has put Commonwealth's exposure at A$1.2 billion, National Australia Bank Ltd's at A$1.1 billion and Australia and New Zealand Banking Group's at A$1.2 billion.
Meanwhile, some of Centro's rivals are preparing to make bids for some A$2.6 billion worth of the company's retail assets, The Australian newspaper reported on Thursday, citing no sources.
The paper said Westfield Group, Commonwealth Bank-managed CFS Retail Property and GPT Group were among those vying for Centro's Australian wholesale trust, which has assets of A$2.6 billion, including interests in shopping malls in Melbourne, Sydney and Perth.
"We look at any opportunity that meets our business model and strategy and that is across all opportunities in the market place," a GPT spokeswoman said, declining to comment on Centro.
The other firms declined to comment.
"There is definitely significant demand for some of their assets, and there are clearly some good quality assets," an industry source told Reuters.
"Good quality Australian assets are generally not available, so when they do become available they are in very high demand."
WSJ(12/21) UPDATE: Merrill May Get Capital Infusion
(From THE WALL STREET JOURNAL) By Jason Leow and Randall Smith Merrill Lynch & Co., facing the likelihood of billions of dollars in additional mortgage-related write-downs in the fourth quarter, is expected to become the latest financial firm to get a capital infusion from an Asian government investment fund.
Temasek Holdings Pte. Ltd., a Singapore state-owned investment company, is in advanced talks to inject as much as $5 billion into Merrill, a person familiar with the situation said.
The news comes amid analyst predictions that mortgage write-downs at Merrill may double with another $8 billion or more in the fourth quarter -- the latest sign that Wall Street isn't out of the subprime woods yet. Temasek's board has given preliminary approval to the investment in Merrill, although pricing, timing and regulatory issues remain to be negotiated, the person familiar with the situation said. As such, a deal may still not materialize.
If an investment by Temasek is finalized, it would follow a string of deals by government funds into the ailing Western financial sector. This week, Morgan Stanley said it would sell a stake of as much as 9.9% for $5 billion to state-run China Investment Corp. UBS this month said it would sell a stake totaling $11.5 billion to an unnamed Middle Eastern investor and to another Singaporean state fund, The Government of Singapore Investment Corp. Citigroup Inc. last month received a $7.5 billion investment from the Abu Dhabi Investment Authority.
A Merrill spokeswoman had no immediate comment. A Temasek spokeswoman declined to comment.
Merrill has been badly hit by the downturn in the U.S. housing market, getting stuck with billions of dollars in asset-backed securities that are now worth a fraction of their value a few months ago. Merrill's stock has been hammered, falling 41% this year and its market capitalization now stands at roughly $47 billion, so a $5 billion investment would represent a significant stake in the company. China's $5 billion investment in Morgan Stanley Wednesday helped bolster that firm's shares.
A further $8 billion write-down at Merrill could take its total mortgage hits to $15.9 billion for the second half of 2007. Merrill Chief Executive Stan O'Neal was ousted in October after disclosing the third-quarter losses. One of the analysts projecting the new write-down, Susan Katzke of Credit Suisse Group, predicted that it could prompt Merrill to seek a capital infusion or sell assets to shore up its balance sheet.
John Thain, Merrill's new CEO, gained a reputation as a savvy deal maker when he was chief of NYSE Euronext, the parent of the New York Stock Exchange. An investment in the firm from an outside fund could be a badly needed shot in the arm, especially if Merrill is facing more write-downs.
A new write-down that big on top of a $7.9 billion write-down in the third quarter could also vault Merrill back above rivals UBS, Citigroup and Morgan Stanley for the dubious distinction of having taken the most mortgage-asset losses on Wall Street.
By comparison, UBS has reported and projected a total of $14.2 billion in mortgage losses for the third and fourth quarters. Citigroup has projected total mortgage-asset damage at $10 billion to $13 billion. And Wednesday Morgan Stanley wrote down $9.4 billion for the fourth quarter after a $1 billion third-quarter hit.
Ms. Katzke of Credit Suisse said asset sales or a capital infusion could help Merrill offset the impact of the resulting decline in Merrill's book-value equity capital. She cited Merrill's 20% holding in Bloomberg LP, the financial publisher, and Merrill's 49% stake in BlackRock Inc. as assets that might be sold.
Merrill's Bloomberg stake could be worth as much as $4 billion, Ms. Katzke said. But the BlackRock stake, currently worth $12 billion, is subject to a three-year lockup blocking sales or purchases that expires in September 2009, a BlackRock spokesman noted.
In a worst-case scenario, Ms. Katzke said, Merrill could write down as much as $12 billion to $15 billion. She said Mr. Thain faces "some painful housecleaning." Other analysts project Merrill may write down $3 billion to $11 billion in the fourth quarter.
After declining as much as $1.95 a share, or 3.6%, based partly on the two reports, Merrill shares recovered most of their losses and declined 23 cents to $54.50 a share in 4 p.m. New York Stock Exchange composite trading. A Merrill spokeswoman declined to comment on the estimates.
An $8 billion write-down could cut Merrill's book value, or assets minus liabilities, to about $30 billion at year-end, down from $37.6 billion in June, Ms. Katzke estimated. Merrill must maintain its regulatory capital, which is roughly comparable to book value, at 10% of its total risk-weighted assets, she noted.
Another analyst, David Trone of Fox-Pit Kelton, estimated Merrill's fourth-quarter write-down at $8.6 billion. He added that the toll could rise by another $2 billion if Merrill's hedge agreements with bond insurer ACA Financial Guaranty Corp., which was downgraded to junk-bond status Wednesday, become worthless.
A READING of the 2008 outlook reports that brokers are issuing reveals an overriding message that although stock markets are in for a volatile few months ahead, investors should look to buy the dips because equities are still attractive and the long-running bull market is not dead - yet.
Or to put it in another way, valuations are still reasonable, the US sub-prime crisis should blow over within a few months and at any rate, the US Federal Reserve will have to resume cutting interest rates to stimulate the economy so investors should be looking to buy stocks. How valid is this view?
The first thing to note is that risks have risen considerably but analysts do not seem to have taken this into account.
It used to be that investors who bought into markets from different parts of the world would reduce portfolio risk through diversification.
However, this has now changed - the rising interconnectedness of all markets over the past decade or so means that a sudden destabilising development in one major market has instant and long-lasting effects almost everywhere else.
This is all the more so when it's a major market like the US which experiences a large shock.
As a result, the inability of a low-income American property punter to meet his or her mortgage payments as property prices fall has led to severe selling of Far Eastern stocks, something that might have been unheard off a decade ago.
If all markets are now tied to each other and diversification benefits are now now much more subdued, a continued bull market scenario is only tenable if every market's economic outlook is positive.
On top of this, no one really knows the extent of sub-prime losses - each time one major US bank declares itself to be immune, another confesses to having to take a big hit.
The bull market story is also reliant on the US central bank being increasingly accommodative next year, as if this is guaranteed whenever there's financial market turmoil.
While this is possible, it isn't by any means a sure thing - at the Dec 11 Federal Open Markets Committee (FOMC) meeting, nine out of 10 Fed governors voted for only a 25 basis point cut instead of the 50 that the markets had wanted, thus sending a clear signal that the Fed would not bow to financial market pressure. Given the uptick in core US prices recently announced, it'll certainly be very interesting to see if the Fed maintains this stand at its January FOMC meeting.
And what of valuations? According to Bloomberg, US analysts currently expect Wall Street's 2008 earnings to grow by almost 13 per cent, from US$80 to US$90 per share. In an economy for which a recession is an increasing likelihood, how reasonable are these figures?
In this context, investors would do well to note the conclusion of US broker Morgan Stanley, which has predicted a US recession next year and repeatedly warned that earnings estimates for Wall Street companies are still too optimistic because a recession is still not in current prices.
Its own in-house estimate is that investors have priced in 13.5 per cent earnings growth for 2008.
'To get to 13.5 per cent, analysts must be expecting extremely high revenue growth, which doesn't seem likely . . . given these results, either we are way off the mark on our recession call and growth will be stronger than we expect over the next year, or analysts' earnings estimates will have to come down,' said Morgan Stanley in a Dec 14 report.
The upshot of all this is that Wall Street is nowhere as healthy as many brokers would have everyone believe. Despite the turmoil of the past few month, US stock prices have not even corrected by 10 per cent. Investors should take note - from these heights and given the heightened risks and an impending US recession, the downside has to be much greater than the upside.
SHANGHAI, Dec 21 (Reuters) - Credit Suisse's (CSGN.VX: Quote, Profile, Research) China asset management venture said on Friday it will launch a fund for sale on Jan. 3 to raise up to 22 billion yuan ($2.99 billion) for investment in overseas financial markets.
ICBC Credit Suisse Asset Management Co will be the fifth Chinese fund house to launch such a fund under the Qualified Domestic Institutional Investor scheme, aimed at giving domestic residents more investment opportunities and to promote a better balance in China's international payments.
The targeted size of the fund, which will focus on stocks of companies that benefit from China's 10 percent a year economic growth, is about a $1 billion less than the $4 billion raised by each of the existing four QDII funds this year.
ICBC Credit Suisse said in a statement that the fund sale would end on Feb 1, but it did not give a reason for the smaller targeted size.
Chinese fund management firms are allowed to raise a maximum of $4 billion for each of their QDII funds through initial public offers. The quota can be expanded to $5 billion through additional offers, industry officials have said.
The existing QDII funds launched earlier this year by four Chinese fund management companies have been snapped up by domestic investors, who sought to diversify their portfolios. But the funds have slipped below their par value due to turmoil in global markets caused by the U.S. subprime mortgage meltdown.
Earlier this week, Societe General's (SOGN.PA: Quote, Profile, Research) China fund business said it had won approval to launch a QDII fund to mainly invest in overseas-listed China-related equities.
So far, a total of 11 domestic fund houses have obtained QDII licences.
(Reporting by Charlie Zhu; Editing by Nick Macfie)
Lehman Faces Lawsuit by Australian Municipal Councils (Update1)
By Stuart Kelly
Dec. 21 (Bloomberg) -- Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, faces legal action by Australian municipal governments after the value of their subprime-related investments dropped as much as 86 percent.
Wingecarribee Shire Council, in the Southern Highlands in New South Wales state, is suing Lehman for ``deceptive and misleading conduct'' in selling A$3 million ($2.6 million) of subprime-linked collateralized debt obligations, the council's managing director Mike Hyde said in a media statement today.
New York-based Lehman, which manages up to A$1 billion on behalf of 35 councils in New South Wales and Western Australia states, may face further action as the assets in its U.S. mortgage-linked product have declined amid a shakeout in global credit markets.
``We strongly deny the claims made in the press statement that we have not acted in their best interests, or that we have engaged in any misleading or deceptive conduct,'' Sinead Taylor, a spokeswoman for Lehman said, in an e-mailed note. ``We have, however, not yet received any notification of any legal claims.''
CDOs are pools of mortgages, corporate loans or commercial real estate loans sliced into bonds with different credit ratings and maturities. Prices for CDOs backed by subprime mortgage bonds have slumped as late payments on loans to U.S. borrowers with poor credit histories mounted over the past six months.
`Angry and Disappointed'
Lehman Brothers Australia, which was rebranded from Grange Securities after being acquired by the New York-based investment bank, is offering to buy Wingecarribee's CDOs for less than 16 percent of their face value. They make up more than 5 percent of the council's total investments.
``We're very angry and disappointed at the way Lehman Brothers is continuing to behave,'' Hyde said in an interview. ``We are taking them to court in view of their intransigence to buy back the investment. We believe that they haven't acted in the council's best interest.''
Municipal governments including Manly Council and Gosford City Council, both in New South Wales, may follow Wingecarribee in suing Lehman ``within three to five months or sooner,'' Hyde said.
Manly, with about A$1 million invested in Lehman subprime- related securities, supported councils which sought legal advice, Peter Macdonald, the city's mayor, said in an interview. Brian Shackleton, a financial manager for Gosford, declined to comment.
Lehman, the fourth-biggest securities firm, this month reported its fourth-quarter net income fell 12 percent to $886 million from $1 billion a year earlier as it wrote down the value of its mortgage-related securities. The firm's subprime exposure was $5.3 billion at the end of the fourth quarter, down from $6.3 billion in the previous period.
Lehman also shut its subprime lending unit, BNC Mortgage LLC, in August after cutting lending to $200 million a month from more than $2 billion a month last year.
UBS faces rebellion over fund injection By Haig Simonian in Zurich and Henny Sender in New York
Published: December 20 2007 22:10 | Last updated: December 20 2007 22:10
UBS, one of the biggest casualties of the US subprime turmoil, faces a shareholders’ revolt over plans for a massive infusion of funds from Singapore and the Middle East to improve its capital ratios.
The move comes as the Financial Times learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS’s recapitalisation is from Saudi Arabia. “It’s a reasonable assumption the ruling family was involved and approved [the deal],” said one figure with knowledge of the negotiations.
Details of the Saudi royal family’s involvement were unclear but one banker believed Prince Sultan, the crown prince and defence minister, was a leading figure in the deal. The investment is understood to be the result of a long relationship between the private banking arm of UBS for the Middle East, headed by Michel Adjadj, and the Saudi royal family. Prince Sultan was not available for comment and UBS declined to comment.
The investor’s insistence on anonymity, which sparked speculation since the arrangement was announced last week after a massive writedown on UBS’s portfolio of mortgage debt, was among concerns raised by critical UBS shareholders on Thursday.
One influential Swiss institutional investor called on shareholders to reject the proposal to raise SFr13bn from sovereign wealth funds. A second demanded a special audit to look at how the bank could have made such massive losses.
The danger of a revolt at the special shareholders’ meeting in February to approve the measures prompted the Swiss National Bank to take the unusual step of recommending the recapitalisation. Philipp Hildebrand, the SNB’s deputy chairman, said: “This is a very good deal. It is very important for UBS and for the country for shareholders to understand this at the extraordinary general meeting.”
Ulrich Grete, head of the Swiss Social Security Compensation Fund, an institutional investor, said the terms offered to the government of Singapore and the Middle East investor were unfair to UBS shareholders. “I believe this solution disadvantages existing shareholders,” he said. Mr Grete also called on UBS to name the mystery investor, as its almost 2 per cent stake would make it one of the biggest single shareholders in the bank.
Separately, the Ethos foundation, an influential Swiss investment lobby, said it would call on the bank to clarify how it had ended up with more than $14bn in writedowns on securities linked to the US residential mortgage market.
UBS said it would “carefully answer all Ethos’s questions”.
Dominique Biedermann, Ethos’s director, stopped short of calling on shareholders to block the recapitalisation. But he said the plan to bring in Singapore as the single biggest shareholder with almost 9 per cent, was “not necessarily the ideal structure”.
UBS, one of the biggest casualties of the US subprime turmoil, faces a shareholders' revolt over plans for a massive infusion of funds from Singapore and the Middle East to improve its capital ratios.
The move comes as the Financial Times learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS's recapitalisation is from Saudi Arabia. "It's a reasonable assumption the ruling family was involved and approved [the deal]," said one figure with knowledge of the negotiations.
Details of the Saudi royal family's involvement were unclear but one banker said he believed Prince Sultan, the crown prince and defence minister, was a leading figure in the deal. The investment is understood to be the result of a long relationship between the private banking arm of UBS for the Middle East, headed by Michel Adjadj, and the Saudi royal family. Prince Sultan was not available for comment and UBS declined to comment.
The investor's insistence on anonymity, which has sparked speculation since the arrangement was announced last week after a massive writedown on UBS's portfolio of mortgage debt, was among concerns raised by UBS shareholders yesterday.
One influential Swiss institutional investor called on shareholders to reject the proposal to raise SFr13bn from sovereign wealth funds. A second de-manded a special audit to look at how the bank could have made such massive losses.
The danger of a revolt at the special shareholders' meeting in February to approve the measures prompted the Swiss National Bank to take the unusual step of recommending the recapitalisation. Philipp Hildebrand, the SNB's deputy chairman, said: "This is a very good deal. It is very important for UBS and for the country for shareholders to understand this at the extraordinary general meeting."
Ulrich Grete, head of the Swiss Social Security Compensation Fund, an institutional investor, said the terms offered to the government of Singapore and the Middle East investor were unfair to UBS shareholders. "I believe this solution disadvantages existing shareholders," he said. Mr Grete also called on UBS to name the mystery investor as its almost 2 per cent stake would make it one of the biggest single shareholders in the bank.
Separately, the Ethos Foundation, an influential Swiss investment lobby, said it would call on the bank to clarify how it had ended up with more than $14bn in writedowns on securities linked to the US residential mortgage market. Even after its latest moves, UBS, which originally held about $40bn of such paper, retains about $29bn.
UBS said it would "carefully answer all Ethos's questions".
Dominique Biedermann, Ethos's director, stopped short of calling on shareholders to block the recapitalisation. But he said the plan to bring in Singapore, a competing financial centre, as the single biggest shareholder with almost 9 per cent, raised serious issues and was "not necessarily the ideal structure".
UBS's critics denied they were being protectionist, saying they were driven by financial or corporate governance issues, including dilution for existing and the view that the 9 per cent coupon on the convertible notes offered to Singapore and the Middle East investor is too generous given the risk involved.
Merrill Lynch May Get $5 Bln Temasek Cash Injection
December 21, 2007: 12:54 AM EST
HONG KONG (Dow Jones) -- Merrill Lynch & Co is in advanced talks to receive a $5 billion cash infusion from Singapore's state investment company Temasek Holdings Ltd., becoming the latest among a number of blue chip Wall Street and European financial institutions to receive funding from Asian or Middle Eastern government funds in the wake of the ongoing turmoil in structured credit markets, according to a media report Friday.
Talks between the organizations are at an advanced stage, The Wall Street Journal reported in its online edition, citing a person with knowledge of the matter.
The Journal report said Temasek's board had given preliminary approval to the investment, although terms on how the multi-billion-dollar investment would be structured as well as timing and regulatory issues were still under negotiation.
A spokesman for Merrill Lynch in Hong Kong declined to comment Friday. A media representative for Temasek in Singapore also declined to comment.
Talks between Temasek and Merrill are ongoing at a time analysts speculate the New York investment bank may book mortgage-related write downs of up to $8 billion in the fourth quarter, more than double earlier reported figures, the Journal reported.
On Friday the Financial Times reported the unidentified Middle Eastern investor channeling $1.73 billion into Swiss bank UBS is from Saudi Arabia.
The report citing an unidentified figure with knowledge of the negotiations said investors could include the Saudi royal family, with Price Sultan, the nation's defense minister, involved in the deal.
Merrill Gains on WSJ Report of Temasek Investment (Update1)
By Kelly Riddell and Jean Chua
Dec. 21 (Bloomberg) -- Merrill Lynch & Co. rose in New York trading after the Wall Street Journal reported that the world's biggest brokerage firm may receive a cash infusion of as much as $5 billion from Singapore's state-owned Temasek Holdings Pte.
Merrill climbed 2.3 percent to $55.76 at 9:38 a.m. in New York Stock Exchange composite trading. The New York-based firm, reeling from the biggest loss in its 93-year history, would join Citigroup Inc., Morgan Stanley and UBS AG in tapping a sovereign wealth fund for capital. Temasek's board has given preliminary approval for the investment, the Journal said, citing people it didn't identify.
Government funds ``are making use of the crisis to buy some of these banks on the cheap,'' said Nicholas Yeo, who helps oversee more than $40 billion in Asian equities at Aberdeen Asset Management in Hong Kong. ``Whether they're buying cheaply enough is hard to say.''
Merrill had declined 19 percent in NYSE trading since the company announced $8.4 billion of writedowns on mortgage-related investments and corporate loans on Oct. 24, and then ousted Chief Executive Officer Stan O'Neal. The company, now led by former NYSE Euronext CEO John Thain, may disclose an additional $8.6 billion of writedowns for the fourth quarter, estimates David Trone, a New York-based analyst at Fox-Pitt Kelton Cochrane Caronia Waller.
Rob Stewart, a Hong Kong-based spokesman for Merrill, declined to comment. Officials at Temasek, the biggest shareholder of Standard Chartered Plc and DBS Group Holdings Ltd., also declined comment. Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.
Temasek Returns
Set up in 1974 to run state assets, Temasek now has more than $100 billion of investments, including controlling stakes in seven of Singapore's 10 biggest publicly traded companies. It holds 28 percent of DBS, Singapore's largest bank.
Temasek, owned by Singapore's finance ministry, has notched up an 18 percent average annual return since its inception. It raised more than $800 million in the past month selling part of its stakes in China Construction Bank Corp. and Bank of China Ltd., the nation's second- and third-largest lenders.
Governments in the Middle East and Asia have agreed to invest about $25 billion in Wall Street firms since banks began to disclose subprime losses.
Citigroup, the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi would invest $7.5 billion in the New York-based company. State-controlled China Investment Corp. is buying an almost 10 percent stake in New York-based Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss of $9.4 billion from mortgage-related holdings on Dec. 19.
Sovereign Funds
Government of Singapore Investment Corp., along with an unidentified Middle Eastern investor, agreed this month to inject 13 billion Swiss francs ($11.2 billion) into Zurich-based UBS, the biggest Swiss bank. The government fund manager, known as GIC, manages more than $100 billion of the nation's foreign reserves.
Investments by sovereign funds may give some respite to banking stocks battered by more than $80 billion of credit- related related losses at the world's biggest financial institutions.
``These things tend to be good signs for the market,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Japan Co., whose parent company manages $1.1 trillion. The investments help ``take away the fears and concerns, and lack of clarity going forward, so generally, it's positive.''
`Big Checks'
Bear Stearns Cos., the securities firm that helped trigger the collapse of the subprime market, struck an agreement in October with China's government-controlled Citic Securities Co. for a $1 billion cross-investment. The New York-based company announced a $1.9 billion writedown on mortgage losses yesterday, sending the firm to its first quarterly loss since it went public in 1985.
Government agencies ``may feel there are bargains out there,'' said David Cohen, an economist at Action Economics in Singapore. ``They can write big checks and these banks appreciate that.''
Merrill has slumped 42 percent in NYSE trading this year, reducing the market value to $46.7 billion.
STX Pan Ocean will buy back shares to use for employees bonuses
Dec. 21 (Bloomberg) -- STX Pan Ocean Co., South Korea's biggest carrier of bulk cargo, said it will buy back 15 million shares for 29.1 billion won ($31 million).
The Seoul-based sea carrier's board today approved the plan to purchase the shares to boost shareholder value and to use for bonuses for employees, STX Pan Ocean said in a regulatory filing today. It will purchase the shares from Dec. 25 to March 24 next year, the filing said.
The company will buy back 2.55 million shares on the Korean exchange and the remainder from Singapore exchange, the filing said.
Shares of STX Pan Ocean fell 2 percent to 3,000 won at the close of trading in Seoul and were unchanged at S$2.66 in Singapore as of 3:25 p.m. The company said in October it will hold a shareholder meeting to discuss the buyback plan.
China shares gain on bargain-hunting, shrug off interest rate hike
SHANGHAI, China: Chinese stocks rose Friday, though property developers declined after the central bank announced an interest rate hike, the country's sixth for this year.
The benchmark Shanghai Composite Index gained 1.2 percent, or 58.24 points, to 5,101.77. The Shenzhen Composite Index rose 1.4 percent to 1,375.89.
The announcement late Thursday of a hike in the benchmark one-year loan rate, by 0.18 percentage point to 7.47 percent, was expected and property developers' losses were limited because they had fallen in anticipation of the move, analysts said.
China Vanke dropped 0.3 percent to 28.30 yuan after shedding 14 percent over the past two weeks, while Poly Real Estate Group fell 1.6 percent to 60.52 yuan after having lost 13 percent over the same period.
Mutual funds were bargain-hunting after resuming selling to new subscribers after a two-month suspension, analysts said.
"Notice that blue chips are up today. This is because large mutual funds ... are buying blue chips," said United Securities analyst Yang Weicong.
Bank of Communications gained 1.2 percent to 14.92 yuan, Air China rose 3.7 percent to 25.99 yuan and Aluminum Corp. of China jumped 3.4 percent to 38.98 yuan.
PetroChina was virtually flat, edging up 0.1 percent to 30.53 yuan.
"The consensus is generally that the stock should be priced at 30 yuan," said CSC International Holdings strategist Amy Lin.
By Quentin Sommerville BBC News, Yangjiang, Guangdong province
Chinese archaeologists have raised a merchant ship which sank in the South China Sea 800 years ago while transporting a cargo of precious porcelain.
The Nanhai 1 treasury ship, built during the Song dynasty which ruled China from 960-1279, is believed to contain one of the biggest discoveries of Chinese artefacts from that period.
"It's the biggest ship of its kind to be found," said professor Liu Wensuo, and archaeologist from Sun Yat-sen University.
"It lay in about 25m (82ft) of water and was covered in mud - perfect conditions for preservation. Both the ship and its contents are in exceptionally good condition."
The salvage team began building a massive steel cage around the 30m (98ft)-long vessel in May in order to raise it and the surrounding silt.
The cage was made up of 36 steel beams, each weighing around 5 tons. Together with its contents, the cage weighed more than 3,000 tons.
The heavy lifting began a day earlier than expected at 0900 on Friday due to favourable weather conditions. It was completed two hours later and placed on a waiting barge.
As many as 6,000 artefacts have already been retrieved from the 13th Century vessel, mostly bluish white porcelain, as well as personal items from crew members, including gold belt buckles and silver rings.
A further 70,000 artefacts are believed to be still on board, many still in their original packing cases.
Valuable cargo
Underwater archaeology is a new field in China.
In the mid-1980s a number of ships, containing enormous hoards of Chinese porcelain, gold and silver, were found by foreign treasure hunters.
Their valuable cargoes were sold at auction houses in the West. At the time, China was too poor to bid for the artefacts.
The loss of such an important part of its history spurred the government into action.
Nanhai 1 will be the first major project to be undertaken by Chinese underwater archaeologists.
Professor Liu is confident that the salvage will be a success.
"This really is only the beginning, there are so many shipwrecks in this area, fishermen often snag artefacts in their nets, sometimes they even wash ashore," he said.
Reclaiming history
It will also give historians much-needed information on a time when China was trading with the world.
During the Song dynasty, most of the country's trade was with India and the Middle East. Later that trade would shift westwards.
"People often think of ancient China as being a closed society, but in the Tang and Song dynasties, China traded with the world - much like today," Professor Liu added.
The Nanhai 1 will eventually be moved to a new purpose built museum near Yangjiang in Guangdong province.
The dramatic building - still far from completion - is being built on the beach.
The ship will be stored underwater in a massive tank, in which the water temperature, pressure and other conditions will be identical to where it lay on the seabed, allowing visitors to watch as archaeologists uncover its secrets.
China has invested about $40m in this project, in the hope of reclaiming a part of the country's history, and this time ensuring it stays in Chinese hands.
ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
While no current residents claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it's just a matter of time before foreclosed families end up at tent city, local housing experts say.
"They don't hit the streets immediately," said activist Jane Mercer. Most families can find transitional housing in a motel or with friends before turning to charity or the streets. "They only hit tent city when they really bottom out."
Steve, 50, who declined to give his last name, moved to tent city four months ago. He gets social security payments, but cannot work and said rents are too high.
"House prices are going down, but the rentals are sky-high," said Steve. "If it wasn't for here, I wouldn't have a place to go."
'SQUATTING IN VACANT HOUSES'
Nationally, foreclosures are at an all-time high. Filings are up nearly 100 percent from a year ago, according to the data firm RealtyTrac. Officials say that as many as half a million people could lose their homes as adjustable mortgage rates rise over the next two years.
California ranks second in the nation for foreclosure filings -- one per 88 households last quarter. Within California, San Bernardino county in the Inland Empire is worse -- one filing for every 43 households, according to RealtyTrac.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
The pattern is cropping up in communities across the country, like Cleveland, Ohio, where Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention Program, said there are entire blocks of homes in Cleveland where 60 or 70 percent of houses are boarded up.
"I don't think there are enough police to go after criminals holed up in those houses, squatting or doing drug deals or whatever," Wiseman said.
"And it's not just a problem of a neighborhood filled with people squatting in the vacant houses, it's the people left behind, who have to worry about people taking siding off your home or breaking into your house while you're sleeping."
Health risks are also on the rise. All those empty swimming pools in California's Inland Empire have become breeding grounds for mosquitoes, which can transmit the sometimes deadly West Nile virus, Riverside County officials say.
'TRICKLE-DOWN EFFECT'
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
For cities, foreclosures can trigger a range of short-term costs, like added policing, inspection and code enforcement. These expenses can be significant, said Lt. Scott Patterson with the San Bernardino Police Department, but the larger concern is that vacant properties lower home values and in the long-run, decrease tax revenues.
And it all comes at a time when municipalities are ill-equipped to respond. High foreclosure rates and declining home values are sapping property tax revenues, a key source of local funding to tackle such problems.
Earlier this month, U.S. President George W. Bush rolled out a plan to slow foreclosures by freezing the interest rates on some loans. But for many in these parts, the intervention is too little and too late.
Ken Sawa, CEO of Catholic Charities in San Bernardino and Riverside counties, said his organization is overwhelmed and ill-equipped to handle the volume of people seeking help.
"We feel helpless," said Sawa. "Obviously, it's a local problem because it's in our backyard, but the solution is not local."
(Additional reporting by Andrea Hopkins in Ohio; Editing by Mary Milliken and Eddie Evans)
14 comments:
2007-12-21
Newly listed HK IPOS; China Railway (0390.HK), U-PRESID CHINA (0220.HK), SINOMA (1893.HK)
曾 淵 滄： 芸 芸 新 股 只 揀 中 鐵
指 昨 日 在 窄 幅 中 波 動 ， 收 市 時 微 跌 ， 成 份 股 個 別 發 展 ， 有 升 有 跌 ， 沒 甚 麼 趨 勢 可 言。 近 來 上 市 的 新 股 ， 除 了 中 鐵 （ 390 ） 、 統 一 （ 220 ） 及 中 材 （ 1893 ） 外 ， 餘 者幾 乎 全 跌 破 招 股 價 ， 抽 新 股 必 賺 的 時 期 過 去 了 ， 現 在 新 股 上 市 得 花 點 時 間 研 究 一 下是 不 是 值 得 申 請 。
上 述 3 隻 新 股 中 ， 統 一 只 是 二 三 線 股 ， 上 市 時 幸 運 地 不 跌破 招 股 價 ， 但 二 三 線 新 股 畢 竟 在 現 階 段 不 值 得 投 資 ， 風 險 極 大 ， 成 交 也 不 多 。 中 鐵是 我 近 日 最 看 好 的 新 股 ， 我 已 經 賣 掉 3/4 的 中 交 建 （ 1800 ） 來 換 取 中 鐵 ， 希 望 將來 中 鐵 股 價 會 跑 贏 中 交 建 。
中 材 昨 日 上 市 ， 表 現 不 錯 ， 但 因 為 我 自 己 堅 持 2007 年 不 再 投 入 新 的 資 金 入 股 市 ， 每 買 一 隻 股 我 就 該 減 持 另 一 些 股 ， 暫 時 而 言 ，我 還 沒 找 到 應 該 減 持 的 股 ， 所 以 就 暫 時 不 考 慮 買 入 中 材 ， 等 過 了 2007 年 再 考 慮 。
下 星 期 是 聖 誕 節 假 期 ， 我 將 到 中 東 約 旦 度 假 ， 今 日 的 約 旦 是 回 國 家 ， 但 還 保 存 不 少 《 聖 經 》 有 記 載 的 古 蹟 ， 值 得 參 觀 。
對 了 ， 昨 日 有 另 一 隻 新 股 比 亞 電 子 （ 285 ） 上 市 ， 這 隻 股 嚴 重 認 購 不 足 ， 但 是 ， 奇 地 ， 昨 日 收 市 價 竟 然 沒 跌 破 招 股 價 ， 還 微 升 2% ， 你 知 道 為 甚 麼 ？ 我 認 為 是 因 為 這隻 股 認 購 額 不 足 很 少 人 申 請 ， 也 因 此 所 有 的 新 股 大 部 份 是 落 在 包 銷 商 身 上 ， 只 要 包銷 商 不 賤 賣 ， 誰 有 股 票 賣 ？ 市 場 上 散 戶 手 上 根 本 沒 有 股 票 ， 如 何 能 賣 ？
炒 錯 變 身 股 冇 得 救
沒人 賣 的 情 況 之 下 ， 實 際 上 如 果 包 銷 商 想 好 好 地 玩 一 玩 ， 倒 可 以 炒 供 求 ， 趁 市 場 缺 貨、 貨 源 歸 邊 之 下 ， 發 狠 地 將 股 價 炒 上 ， 股 票 市 場 往 往 是 不 問 基 本 因 素 而 純 粹 炒 供 給的 短 缺 ， 這 是 三 四 線 股 莊 家 的 傳 統 手 法 。
當 然 ， 這 種 炒 法 只 能 炒 一 段 很 短 的 時 間 ， 我 不 建 議 大 家 高 追 這 種 炒 供 求 的 股 ， 若 真 想 炒 ， 也 必 須 有 賭 博 的 精 神 。
數天 前 ， 我 就 收 到 一 封 求 救 的 電 郵 ， 這 位 讀 者 以 高 價 買 入 創 新 能 源 （ 702 ） ， 問 我 怎麼 辦 ？ 我 實 在 沒 辦 法 幫 助 他 ， 我 從 來 沒 有 推 薦 過 這 隻 股 ， 不 但 沒 推 薦 ， 也 不 點 名 地呼 籲 讀 者 們 小 心 這 類 「 變 身 股 」 ， 這 位 讀 者 就 是 因 為 讀 到 報 道 說 這 家 公 司 發 現 了 石油 而 高 價 追 入 ， 如 今 ， 除 了 後 悔 之 外 ， 還 能 做 甚 麼 ？
Investors count Centro losses as rivals eye assets
20 December 2007
MELBOURNE (Reuters) - Some of Australia's top fund managers face big losses from the this week's 80 percent slump in Centro Properties Group shares, as several of the mall operator's rivals begin to scan its assets for possible purchases.
Centro, which owns 700 shopping malls in the United States, has lost some A$4.5 billion ($3.8 billion) in market value after it revealed that it and its affiliates were having trouble refinancing A$3.9 billion in debt due to the global credit crunch.
Documents filed with the Australian Securities and Investment Commission show that Barclays unit Barclays Global Investors Australia, Colonial First State, and UBS Asset Management all held stakes of over 5 percent in Centro.
"It was a concentrated register. When you see the end of month performance numbers, you'll see it's had an enormous negative impact on those who owned it. Bonuses will be on the line," said BT Investment Management portfolio manager Jack Chemello.
"The demise of Centro is going to be a defining event in property investment in Australia, between those who got it right and those who got it wrong."
Centro shares fell as much as 86 percent to an all-time low of $0.42 on Tuesday, before recovering to $0.80. They have since risen to A$1.32 at Thursday's close after the company said it was still viable and did not have to sell assets. It has to renegotiate some debt facilities by a mid-February deadline.
Colonial, the wealth management arm of Commonwealth Bank of Australia Ltd, said it had a 12.18 percent stake in Centro as at December 12, across a large number of funds.
The stake was worth A$587 million on December 12. If unchanged, it would now be worth less than a quarter of that -- about A$136 million -- based on Centro's last traded price.
A Colonial spokeswoman declined to comment on the specific value of the stake.
LOST VALUE
Barclays' Australian arm raised its Centro stake on December 4 to 9.3 percent, worth some A$568 million then. The stake would have been worth A$103 million on Thursday. Barclays did not return calls seeking comment.
UBS Asset Management said its stake in Centro on December 13 was 5.09 percent, worth A$258 million. That compares with A$57 million as of Thursday. UBS confirmed the shareholding on Thursday, but declined to comment further.
Close to 90 percent of the shares on issue have been traded in the past four days.
Australia's big banks have declined to comment on reports about their exposure to Centro. Local media has put Commonwealth's exposure at A$1.2 billion, National Australia Bank Ltd's at A$1.1 billion and Australia and New Zealand Banking Group's at A$1.2 billion.
Meanwhile, some of Centro's rivals are preparing to make bids for some A$2.6 billion worth of the company's retail assets, The Australian newspaper reported on Thursday, citing no sources.
The paper said Westfield Group, Commonwealth Bank-managed CFS Retail Property and GPT Group were among those vying for Centro's Australian wholesale trust, which has assets of A$2.6 billion, including interests in shopping malls in Melbourne, Sydney and Perth.
"We look at any opportunity that meets our business model and strategy and that is across all opportunities in the market place," a GPT spokeswoman said, declining to comment on Centro.
The other firms declined to comment.
"There is definitely significant demand for some of their assets, and there are clearly some good quality assets," an industry source told Reuters.
"Good quality Australian assets are generally not available, so when they do become available they are in very high demand."
WSJ(12/21) UPDATE: Merrill May Get Capital Infusion
(From THE WALL STREET JOURNAL)
By Jason Leow and Randall Smith
Merrill Lynch & Co., facing the likelihood of billions of dollars in additional mortgage-related write-downs in the fourth quarter, is expected to become the latest financial firm to get a capital infusion from an Asian government investment fund.
Temasek Holdings Pte. Ltd., a Singapore state-owned investment company, is in advanced talks to inject as much as $5 billion into Merrill, a person familiar with the situation said.
The news comes amid analyst predictions that mortgage write-downs at Merrill may double with another $8 billion or more in the fourth quarter -- the latest sign that Wall Street isn't out of the subprime woods yet. Temasek's board has given preliminary approval to the investment in Merrill, although pricing, timing and regulatory issues remain to be negotiated, the person familiar with the situation said. As such, a deal may still not materialize.
If an investment by Temasek is finalized, it would follow a string of deals by government funds into the ailing Western financial sector. This week, Morgan Stanley said it would sell a stake of as much as 9.9% for $5 billion to state-run China Investment Corp. UBS this month said it would sell a stake totaling $11.5 billion to an unnamed Middle Eastern investor and to another Singaporean state fund, The Government of Singapore Investment Corp. Citigroup Inc. last month received a $7.5 billion investment from the Abu Dhabi Investment Authority.
A Merrill spokeswoman had no immediate comment. A Temasek spokeswoman declined to comment.
Merrill has been badly hit by the downturn in the U.S. housing market, getting stuck with billions of dollars in asset-backed securities that are now worth a fraction of their value a few months ago. Merrill's stock has been hammered, falling 41% this year and its market capitalization now stands at roughly $47 billion, so a $5 billion investment would represent a significant stake in the company. China's $5 billion investment in Morgan Stanley Wednesday helped bolster that firm's shares.
A further $8 billion write-down at Merrill could take its total mortgage hits to $15.9 billion for the second half of 2007. Merrill Chief Executive Stan O'Neal was ousted in October after disclosing the third-quarter losses. One of the analysts projecting the new write-down, Susan Katzke of Credit Suisse Group, predicted that it could prompt Merrill to seek a capital infusion or sell assets to shore up its balance sheet.
John Thain, Merrill's new CEO, gained a reputation as a savvy deal maker when he was chief of NYSE Euronext, the parent of the New York Stock Exchange. An investment in the firm from an outside fund could be a badly needed shot in the arm, especially if Merrill is facing more write-downs.
A new write-down that big on top of a $7.9 billion write-down in the third quarter could also vault Merrill back above rivals UBS, Citigroup and Morgan Stanley for the dubious distinction of having taken the most mortgage-asset losses on Wall Street.
By comparison, UBS has reported and projected a total of $14.2 billion in mortgage losses for the third and fourth quarters. Citigroup has projected total mortgage-asset damage at $10 billion to $13 billion. And Wednesday Morgan Stanley wrote down $9.4 billion for the fourth quarter after a $1 billion third-quarter hit.
Ms. Katzke of Credit Suisse said asset sales or a capital infusion could help Merrill offset the impact of the resulting decline in Merrill's book-value equity capital. She cited Merrill's 20% holding in Bloomberg LP, the financial publisher, and Merrill's 49% stake in BlackRock Inc. as assets that might be sold.
Merrill's Bloomberg stake could be worth as much as $4 billion, Ms. Katzke said. But the BlackRock stake, currently worth $12 billion, is subject to a three-year lockup blocking sales or purchases that expires in September 2009, a BlackRock spokesman noted.
In a worst-case scenario, Ms. Katzke said, Merrill could write down as much as $12 billion to $15 billion. She said Mr. Thain faces "some painful housecleaning." Other analysts project Merrill may write down $3 billion to $11 billion in the fourth quarter.
After declining as much as $1.95 a share, or 3.6%, based partly on the two reports, Merrill shares recovered most of their losses and declined 23 cents to $54.50 a share in 4 p.m. New York Stock Exchange composite trading. A Merrill spokeswoman declined to comment on the estimates.
An $8 billion write-down could cut Merrill's book value, or assets minus liabilities, to about $30 billion at year-end, down from $37.6 billion in June, Ms. Katzke estimated. Merrill must maintain its regulatory capital, which is roughly comparable to book value, at 10% of its total risk-weighted assets, she noted.
Another analyst, David Trone of Fox-Pit Kelton, estimated Merrill's fourth-quarter write-down at $8.6 billion. He added that the toll could rise by another $2 billion if Merrill's hedge agreements with bond insurer ACA Financial Guaranty Corp., which was downgraded to junk-bond status Wednesday, become worthless.
(END) Dow Jones Newswires
December 20, 2007 22:44 ET (03:44 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc.
How bullish is the outlook for stocks?
The Business Times
December 21, 2007
By R SIVANITHY
A READING of the 2008 outlook reports that brokers are issuing reveals an overriding message that although stock markets are in for a volatile few months ahead, investors should look to buy the dips because equities are still attractive and the long-running bull market is not dead - yet.
Or to put it in another way, valuations are still reasonable, the US sub-prime crisis should blow over within a few months and at any rate, the US Federal Reserve will have to resume cutting interest rates to stimulate the economy so investors should be looking to buy stocks. How valid is this view?
The first thing to note is that risks have risen considerably but analysts do not seem to have taken this into account.
It used to be that investors who bought into markets from different parts of the world would reduce portfolio risk through diversification.
However, this has now changed - the rising interconnectedness of all markets over the past decade or so means that a sudden destabilising development in one major market has instant and long-lasting effects almost everywhere else.
This is all the more so when it's a major market like the US which experiences a large shock.
As a result, the inability of a low-income American property punter to meet his or her mortgage payments as property prices fall has led to severe selling of Far Eastern stocks, something that might have been unheard off a decade ago.
If all markets are now tied to each other and diversification benefits are now now much more subdued, a continued bull market scenario is only tenable if every market's economic outlook is positive.
On top of this, no one really knows the extent of sub-prime losses - each time one major US bank declares itself to be immune, another confesses to having to take a big hit.
The bull market story is also reliant on the US central bank being increasingly accommodative next year, as if this is guaranteed whenever there's financial market turmoil.
While this is possible, it isn't by any means a sure thing - at the Dec 11 Federal Open Markets Committee (FOMC) meeting, nine out of 10 Fed governors voted for only a 25 basis point cut instead of the 50 that the markets had wanted, thus sending a clear signal that the Fed would not bow to financial market pressure. Given the uptick in core US prices recently announced, it'll certainly be very interesting to see if the Fed maintains this stand at its January FOMC meeting.
And what of valuations? According to Bloomberg, US analysts currently expect Wall Street's 2008 earnings to grow by almost 13 per cent, from US$80 to US$90 per share. In an economy for which a recession is an increasing likelihood, how reasonable are these figures?
In this context, investors would do well to note the conclusion of US broker Morgan Stanley, which has predicted a US recession next year and repeatedly warned that earnings estimates for Wall Street companies are still too optimistic because a recession is still not in current prices.
Its own in-house estimate is that investors have priced in 13.5 per cent earnings growth for 2008.
'To get to 13.5 per cent, analysts must be expecting extremely high revenue growth, which doesn't seem likely . . . given these results, either we are way off the mark on our recession call and growth will be stronger than we expect over the next year, or analysts' earnings estimates will have to come down,' said Morgan Stanley in a Dec 14 report.
The upshot of all this is that Wall Street is nowhere as healthy as many brokers would have everyone believe. Despite the turmoil of the past few month, US stock prices have not even corrected by 10 per cent. Investors should take note - from these heights and given the heightened risks and an impending US recession, the downside has to be much greater than the upside.
SHANGHAI, Dec 21 (Reuters) - Credit Suisse's (CSGN.VX: Quote, Profile, Research) China asset management venture said on Friday it will launch a fund for sale on Jan. 3 to raise up to 22 billion yuan ($2.99 billion) for investment in overseas financial markets.
ICBC Credit Suisse Asset Management Co will be the fifth Chinese fund house to launch such a fund under the Qualified Domestic Institutional Investor scheme, aimed at giving domestic residents more investment opportunities and to promote a better balance in China's international payments.
The targeted size of the fund, which will focus on stocks of companies that benefit from China's 10 percent a year economic growth, is about a $1 billion less than the $4 billion raised by each of the existing four QDII funds this year.
ICBC Credit Suisse said in a statement that the fund sale would end on Feb 1, but it did not give a reason for the smaller targeted size.
Chinese fund management firms are allowed to raise a maximum of $4 billion for each of their QDII funds through initial public offers. The quota can be expanded to $5 billion through additional offers, industry officials have said.
The existing QDII funds launched earlier this year by four Chinese fund management companies have been snapped up by domestic investors, who sought to diversify their portfolios. But the funds have slipped below their par value due to turmoil in global markets caused by the U.S. subprime mortgage meltdown.
Earlier this week, Societe General's (SOGN.PA: Quote, Profile, Research) China fund business said it had won approval to launch a QDII fund to mainly invest in overseas-listed China-related equities.
So far, a total of 11 domestic fund houses have obtained QDII licences.
(Reporting by Charlie Zhu; Editing by Nick Macfie)
Lehman Faces Lawsuit by Australian Municipal Councils (Update1)
By Stuart Kelly
Dec. 21 (Bloomberg) -- Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, faces legal action by Australian municipal governments after the value of their subprime-related investments dropped as much as 86 percent.
Wingecarribee Shire Council, in the Southern Highlands in New South Wales state, is suing Lehman for ``deceptive and misleading conduct'' in selling A$3 million ($2.6 million) of subprime-linked collateralized debt obligations, the council's managing director Mike Hyde said in a media statement today.
New York-based Lehman, which manages up to A$1 billion on behalf of 35 councils in New South Wales and Western Australia states, may face further action as the assets in its U.S. mortgage-linked product have declined amid a shakeout in global credit markets.
``We strongly deny the claims made in the press statement that we have not acted in their best interests, or that we have engaged in any misleading or deceptive conduct,'' Sinead Taylor, a spokeswoman for Lehman said, in an e-mailed note. ``We have, however, not yet received any notification of any legal claims.''
CDOs are pools of mortgages, corporate loans or commercial real estate loans sliced into bonds with different credit ratings and maturities. Prices for CDOs backed by subprime mortgage bonds have slumped as late payments on loans to U.S. borrowers with poor credit histories mounted over the past six months.
`Angry and Disappointed'
Lehman Brothers Australia, which was rebranded from Grange Securities after being acquired by the New York-based investment bank, is offering to buy Wingecarribee's CDOs for less than 16 percent of their face value. They make up more than 5 percent of the council's total investments.
``We're very angry and disappointed at the way Lehman Brothers is continuing to behave,'' Hyde said in an interview. ``We are taking them to court in view of their intransigence to buy back the investment. We believe that they haven't acted in the council's best interest.''
Municipal governments including Manly Council and Gosford City Council, both in New South Wales, may follow Wingecarribee in suing Lehman ``within three to five months or sooner,'' Hyde said.
Manly, with about A$1 million invested in Lehman subprime- related securities, supported councils which sought legal advice, Peter Macdonald, the city's mayor, said in an interview. Brian Shackleton, a financial manager for Gosford, declined to comment.
Lehman, the fourth-biggest securities firm, this month reported its fourth-quarter net income fell 12 percent to $886 million from $1 billion a year earlier as it wrote down the value of its mortgage-related securities. The firm's subprime exposure was $5.3 billion at the end of the fourth quarter, down from $6.3 billion in the previous period.
Lehman also shut its subprime lending unit, BNC Mortgage LLC, in August after cutting lending to $200 million a month from more than $2 billion a month last year.
UBS faces rebellion over fund injection
By Haig Simonian in Zurich and Henny Sender in New York
Published: December 20 2007 22:10 | Last updated: December 20 2007 22:10
UBS, one of the biggest casualties of the US subprime turmoil, faces a shareholders’ revolt over plans for a massive infusion of funds from Singapore and the Middle East to improve its capital ratios.
The move comes as the Financial Times learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS’s recapitalisation is from Saudi Arabia. “It’s a reasonable assumption the ruling family was involved and approved [the deal],” said one figure with knowledge of the negotiations.
Details of the Saudi royal family’s involvement were unclear but one banker believed Prince Sultan, the crown prince and defence minister, was a leading figure in the deal. The investment is understood to be the result of a long relationship between the private banking arm of UBS for the Middle East, headed by Michel Adjadj, and the Saudi royal family. Prince Sultan was not available for comment and UBS declined to comment.
The investor’s insistence on anonymity, which sparked speculation since the arrangement was announced last week after a massive writedown on UBS’s portfolio of mortgage debt, was among concerns raised by critical UBS shareholders on Thursday.
One influential Swiss institutional investor called on shareholders to reject the proposal to raise SFr13bn from sovereign wealth funds. A second demanded a special audit to look at how the bank could have made such massive losses.
The danger of a revolt at the special shareholders’ meeting in February to approve the measures prompted the Swiss National Bank to take the unusual step of recommending the recapitalisation. Philipp Hildebrand, the SNB’s deputy chairman, said: “This is a very good deal. It is very important for UBS and for the country for shareholders to understand this at the extraordinary general meeting.”
Ulrich Grete, head of the Swiss Social Security Compensation Fund, an institutional investor, said the terms offered to the government of Singapore and the Middle East investor were unfair to UBS shareholders. “I believe this solution disadvantages existing shareholders,” he said. Mr Grete also called on UBS to name the mystery investor, as its almost 2 per cent stake would make it one of the biggest single shareholders in the bank.
Separately, the Ethos foundation, an influential Swiss investment lobby, said it would call on the bank to clarify how it had ended up with more than $14bn in writedowns on securities linked to the US residential mortgage market.
UBS said it would “carefully answer all Ethos’s questions”.
Dominique Biedermann, Ethos’s director, stopped short of calling on shareholders to block the recapitalisation. But he said the plan to bring in Singapore as the single biggest shareholder with almost 9 per cent, was “not necessarily the ideal structure”.
Copyright The Financial Times Limited 2007
UBS threatened with revolt over funds infusion
December 21 2007
UBS, one of the biggest casualties of the US subprime turmoil, faces a shareholders' revolt over plans for a massive infusion of funds from Singapore and the Middle East to improve its capital ratios.
The move comes as the Financial Times learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS's recapitalisation is from Saudi Arabia. "It's a reasonable assumption the ruling family was involved and approved [the deal]," said one figure with knowledge of the negotiations.
Details of the Saudi royal family's involvement were unclear but one banker said he believed Prince Sultan, the crown prince and defence minister, was a leading figure in the deal. The investment is understood to be the result of a long relationship between the private banking arm of UBS for the Middle East, headed by Michel Adjadj, and the Saudi royal family. Prince Sultan was not available for comment and UBS declined to comment.
The investor's insistence on anonymity, which has sparked speculation since the arrangement was announced last week after a massive writedown on UBS's portfolio of mortgage debt, was among concerns raised by UBS shareholders yesterday.
One influential Swiss institutional investor called on shareholders to reject the proposal to raise SFr13bn from sovereign wealth funds. A second de-manded a special audit to look at how the bank could have made such massive losses.
The danger of a revolt at the special shareholders' meeting in February to approve the measures prompted the Swiss National Bank to take the unusual step of recommending the recapitalisation. Philipp Hildebrand, the SNB's deputy chairman, said: "This is a very good deal. It is very important for UBS and for the country for shareholders to understand this at the extraordinary general meeting."
Ulrich Grete, head of the Swiss Social Security Compensation Fund, an institutional investor, said the terms offered to the government of Singapore and the Middle East investor were unfair to UBS shareholders. "I believe this solution disadvantages existing shareholders," he said. Mr Grete also called on UBS to name the mystery investor as its almost 2 per cent stake would make it one of the biggest single shareholders in the bank.
Separately, the Ethos Foundation, an influential Swiss investment lobby, said it would call on the bank to clarify how it had ended up with more than $14bn in writedowns on securities linked to the US residential mortgage market. Even after its latest moves, UBS, which originally held about $40bn of such paper, retains about $29bn.
UBS said it would "carefully answer all Ethos's questions".
Dominique Biedermann, Ethos's director, stopped short of calling on shareholders to block the recapitalisation. But he said the plan to bring in Singapore, a competing financial centre, as the single biggest shareholder with almost 9 per cent, raised serious issues and was "not necessarily the ideal structure".
UBS's critics denied they were being protectionist, saying they were driven by financial or corporate governance issues, including dilution for existing and the view that the 9 per cent coupon on the convertible notes offered to Singapore and the Middle East investor is too generous given the risk involved.
Merrill Lynch May Get $5 Bln Temasek Cash Injection
December 21, 2007: 12:54 AM EST
HONG KONG (Dow Jones) -- Merrill Lynch & Co is in advanced talks to receive a $5 billion cash infusion from Singapore's state investment company Temasek Holdings Ltd., becoming the latest among a number of blue chip Wall Street and European financial institutions to receive funding from Asian or Middle Eastern government funds in the wake of the ongoing turmoil in structured credit markets, according to a media report Friday.
Talks between the organizations are at an advanced stage, The Wall Street Journal reported in its online edition, citing a person with knowledge of the matter.
The Journal report said Temasek's board had given preliminary approval to the investment, although terms on how the multi-billion-dollar investment would be structured as well as timing and regulatory issues were still under negotiation.
A spokesman for Merrill Lynch in Hong Kong declined to comment Friday. A media representative for Temasek in Singapore also declined to comment.
Talks between Temasek and Merrill are ongoing at a time analysts speculate the New York investment bank may book mortgage-related write downs of up to $8 billion in the fourth quarter, more than double earlier reported figures, the Journal reported.
On Friday the Financial Times reported the unidentified Middle Eastern investor channeling $1.73 billion into Swiss bank UBS is from Saudi Arabia.
The report citing an unidentified figure with knowledge of the negotiations said investors could include the Saudi royal family, with Price Sultan, the nation's defense minister, involved in the deal.
Merrill Gains on WSJ Report of Temasek Investment (Update1)
By Kelly Riddell and Jean Chua
Dec. 21 (Bloomberg) -- Merrill Lynch & Co. rose in New York trading after the Wall Street Journal reported that the world's biggest brokerage firm may receive a cash infusion of as much as $5 billion from Singapore's state-owned Temasek Holdings Pte.
Merrill climbed 2.3 percent to $55.76 at 9:38 a.m. in New York Stock Exchange composite trading. The New York-based firm, reeling from the biggest loss in its 93-year history, would join Citigroup Inc., Morgan Stanley and UBS AG in tapping a sovereign wealth fund for capital. Temasek's board has given preliminary approval for the investment, the Journal said, citing people it didn't identify.
Government funds ``are making use of the crisis to buy some of these banks on the cheap,'' said Nicholas Yeo, who helps oversee more than $40 billion in Asian equities at Aberdeen Asset Management in Hong Kong. ``Whether they're buying cheaply enough is hard to say.''
Merrill had declined 19 percent in NYSE trading since the company announced $8.4 billion of writedowns on mortgage-related investments and corporate loans on Oct. 24, and then ousted Chief Executive Officer Stan O'Neal. The company, now led by former NYSE Euronext CEO John Thain, may disclose an additional $8.6 billion of writedowns for the fourth quarter, estimates David Trone, a New York-based analyst at Fox-Pitt Kelton Cochrane Caronia Waller.
Rob Stewart, a Hong Kong-based spokesman for Merrill, declined to comment. Officials at Temasek, the biggest shareholder of Standard Chartered Plc and DBS Group Holdings Ltd., also declined comment. Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.
Temasek Returns
Set up in 1974 to run state assets, Temasek now has more than $100 billion of investments, including controlling stakes in seven of Singapore's 10 biggest publicly traded companies. It holds 28 percent of DBS, Singapore's largest bank.
Temasek, owned by Singapore's finance ministry, has notched up an 18 percent average annual return since its inception. It raised more than $800 million in the past month selling part of its stakes in China Construction Bank Corp. and Bank of China Ltd., the nation's second- and third-largest lenders.
Governments in the Middle East and Asia have agreed to invest about $25 billion in Wall Street firms since banks began to disclose subprime losses.
Citigroup, the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi would invest $7.5 billion in the New York-based company. State-controlled China Investment Corp. is buying an almost 10 percent stake in New York-based Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss of $9.4 billion from mortgage-related holdings on Dec. 19.
Sovereign Funds
Government of Singapore Investment Corp., along with an unidentified Middle Eastern investor, agreed this month to inject 13 billion Swiss francs ($11.2 billion) into Zurich-based UBS, the biggest Swiss bank. The government fund manager, known as GIC, manages more than $100 billion of the nation's foreign reserves.
Investments by sovereign funds may give some respite to banking stocks battered by more than $80 billion of credit- related related losses at the world's biggest financial institutions.
``These things tend to be good signs for the market,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Japan Co., whose parent company manages $1.1 trillion. The investments help ``take away the fears and concerns, and lack of clarity going forward, so generally, it's positive.''
`Big Checks'
Bear Stearns Cos., the securities firm that helped trigger the collapse of the subprime market, struck an agreement in October with China's government-controlled Citic Securities Co. for a $1 billion cross-investment. The New York-based company announced a $1.9 billion writedown on mortgage losses yesterday, sending the firm to its first quarterly loss since it went public in 1985.
Government agencies ``may feel there are bargains out there,'' said David Cohen, an economist at Action Economics in Singapore. ``They can write big checks and these banks appreciate that.''
Merrill has slumped 42 percent in NYSE trading this year, reducing the market value to $46.7 billion.
Last Updated: December 21, 2007 09:41 EST
STX Pan Ocean will buy back shares to use for employees bonuses
Dec. 21 (Bloomberg) -- STX Pan Ocean Co., South Korea's biggest carrier of bulk cargo, said it will buy back 15 million shares for 29.1 billion won ($31 million).
The Seoul-based sea carrier's board today approved the plan to purchase the shares to boost shareholder value and to use for bonuses for employees, STX Pan Ocean said in a regulatory filing today. It will purchase the shares from Dec. 25 to March 24 next year, the filing said.
The company will buy back 2.55 million shares on the Korean exchange and the remainder from Singapore exchange, the filing said.
Shares of STX Pan Ocean fell 2 percent to 3,000 won at the close of trading in Seoul and were unchanged at S$2.66 in Singapore as of 3:25 p.m. The company said in October it will hold a shareholder meeting to discuss the buyback plan.
China shares gain on bargain-hunting, shrug off interest rate hike
SHANGHAI, China: Chinese stocks rose Friday, though property developers declined after the central bank announced an interest rate hike, the country's sixth for this year.
The benchmark Shanghai Composite Index gained 1.2 percent, or 58.24 points, to 5,101.77. The Shenzhen Composite Index rose 1.4 percent to 1,375.89.
The announcement late Thursday of a hike in the benchmark one-year loan rate, by 0.18 percentage point to 7.47 percent, was expected and property developers' losses were limited because they had fallen in anticipation of the move, analysts said.
China Vanke dropped 0.3 percent to 28.30 yuan after shedding 14 percent over the past two weeks, while Poly Real Estate Group fell 1.6 percent to 60.52 yuan after having lost 13 percent over the same period.
Mutual funds were bargain-hunting after resuming selling to new subscribers after a two-month suspension, analysts said.
"Notice that blue chips are up today. This is because large mutual funds ... are buying blue chips," said United Securities analyst Yang Weicong.
Bank of Communications gained 1.2 percent to 14.92 yuan, Air China rose 3.7 percent to 25.99 yuan and Aluminum Corp. of China jumped 3.4 percent to 38.98 yuan.
PetroChina was virtually flat, edging up 0.1 percent to 30.53 yuan.
"The consensus is generally that the stock should be priced at 30 yuan," said CSC International Holdings strategist Amy Lin.
Ancient ship raised from S China Sea
By Quentin Sommerville
BBC News, Yangjiang, Guangdong province
Chinese archaeologists have raised a merchant ship which sank in the South China Sea 800 years ago while transporting a cargo of precious porcelain.
The Nanhai 1 treasury ship, built during the Song dynasty which ruled China from 960-1279, is believed to contain one of the biggest discoveries of Chinese artefacts from that period.
"It's the biggest ship of its kind to be found," said professor Liu Wensuo, and archaeologist from Sun Yat-sen University.
"It lay in about 25m (82ft) of water and was covered in mud - perfect conditions for preservation. Both the ship and its contents are in exceptionally good condition."
The salvage team began building a massive steel cage around the 30m (98ft)-long vessel in May in order to raise it and the surrounding silt.
The cage was made up of 36 steel beams, each weighing around 5 tons. Together with its contents, the cage weighed more than 3,000 tons.
The heavy lifting began a day earlier than expected at 0900 on Friday due to favourable weather conditions. It was completed two hours later and placed on a waiting barge.
As many as 6,000 artefacts have already been retrieved from the 13th Century vessel, mostly bluish white porcelain, as well as personal items from crew members, including gold belt buckles and silver rings.
A further 70,000 artefacts are believed to be still on board, many still in their original packing cases.
Valuable cargo
Underwater archaeology is a new field in China.
In the mid-1980s a number of ships, containing enormous hoards of Chinese porcelain, gold and silver, were found by foreign treasure hunters.
Their valuable cargoes were sold at auction houses in the West. At the time, China was too poor to bid for the artefacts.
The loss of such an important part of its history spurred the government into action.
Nanhai 1 will be the first major project to be undertaken by Chinese underwater archaeologists.
Professor Liu is confident that the salvage will be a success.
"This really is only the beginning, there are so many shipwrecks in this area, fishermen often snag artefacts in their nets, sometimes they even wash ashore," he said.
Reclaiming history
It will also give historians much-needed information on a time when China was trading with the world.
During the Song dynasty, most of the country's trade was with India and the Middle East. Later that trade would shift westwards.
"People often think of ancient China as being a closed society, but in the Tang and Song dynasties, China traded with the world - much like today," Professor Liu added.
The Nanhai 1 will eventually be moved to a new purpose built museum near Yangjiang in Guangdong province.
The dramatic building - still far from completion - is being built on the beach.
The ship will be stored underwater in a massive tank, in which the water temperature, pressure and other conditions will be identical to where it lay on the seabed, allowing visitors to watch as archaeologists uncover its secrets.
China has invested about $40m in this project, in the hope of reclaiming a part of the country's history, and this time ensuring it stays in Chinese hands.
Tent city in suburbs is cost of home crisis
Fri Dec 21, 2007 2:11pm EST
By Dana Ford
ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
While no current residents claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it's just a matter of time before foreclosed families end up at tent city, local housing experts say.
"They don't hit the streets immediately," said activist Jane Mercer. Most families can find transitional housing in a motel or with friends before turning to charity or the streets. "They only hit tent city when they really bottom out."
Steve, 50, who declined to give his last name, moved to tent city four months ago. He gets social security payments, but cannot work and said rents are too high.
"House prices are going down, but the rentals are sky-high," said Steve. "If it wasn't for here, I wouldn't have a place to go."
'SQUATTING IN VACANT HOUSES'
Nationally, foreclosures are at an all-time high. Filings are up nearly 100 percent from a year ago, according to the data firm RealtyTrac. Officials say that as many as half a million people could lose their homes as adjustable mortgage rates rise over the next two years.
California ranks second in the nation for foreclosure filings -- one per 88 households last quarter. Within California, San Bernardino county in the Inland Empire is worse -- one filing for every 43 households, according to RealtyTrac.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
The pattern is cropping up in communities across the country, like Cleveland, Ohio, where Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention Program, said there are entire blocks of homes in Cleveland where 60 or 70 percent of houses are boarded up.
"I don't think there are enough police to go after criminals holed up in those houses, squatting or doing drug deals or whatever," Wiseman said.
"And it's not just a problem of a neighborhood filled with people squatting in the vacant houses, it's the people left behind, who have to worry about people taking siding off your home or breaking into your house while you're sleeping."
Health risks are also on the rise. All those empty swimming pools in California's Inland Empire have become breeding grounds for mosquitoes, which can transmit the sometimes deadly West Nile virus, Riverside County officials say.
'TRICKLE-DOWN EFFECT'
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
For cities, foreclosures can trigger a range of short-term costs, like added policing, inspection and code enforcement. These expenses can be significant, said Lt. Scott Patterson with the San Bernardino Police Department, but the larger concern is that vacant properties lower home values and in the long-run, decrease tax revenues.
And it all comes at a time when municipalities are ill-equipped to respond. High foreclosure rates and declining home values are sapping property tax revenues, a key source of local funding to tackle such problems.
Earlier this month, U.S. President George W. Bush rolled out a plan to slow foreclosures by freezing the interest rates on some loans. But for many in these parts, the intervention is too little and too late.
Ken Sawa, CEO of Catholic Charities in San Bernardino and Riverside counties, said his organization is overwhelmed and ill-equipped to handle the volume of people seeking help.
"We feel helpless," said Sawa. "Obviously, it's a local problem because it's in our backyard, but the solution is not local."
(Additional reporting by Andrea Hopkins in Ohio; Editing by Mary Milliken and Eddie Evans)
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