China Should Raise Rates, World Bank Economist Says
March 4 (Bloomberg) -- China should raise interest rates to curb the fastest inflation in 11 years and rein in stock and property prices, said Justin Lin Yifu, the World Bank’s next chief economist.
“If the central bank doesn’t raise interest rates, real deposit rates will be negative,” Lin told reporters in Beijing at a meeting to prepare for the National People’s Congress tomorrow. “I advocate China keeping interest rates flexible to keep real rates positive and to control asset prices.”
China has kept rates on hold this year after six increases in 2007 as the central bank assesses the impact of snowstorms in January, weakening U.S. export demand and a declining stock market. Inflation has reached 7.1 percent while the CSI 300 Index of stocks, after retreating 13 percent this year, has still more than doubled since the start of 2007.
“The central bank may need to raise rates as soon as this month because inflation may have been even higher in February because of the disruptions from snowstorms,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. Deposit rates may rise more than lending rates, said Xing, who expects February’s inflation rate to be 8.5 percent.
China’s key lending and deposit rates are at nine-year highs of 7.47 percent and 4.14 percent. The most recent increase took effect Dec. 21.
CSI 300 Index
Inflation higher than deposit rates makes it harder for the government to rein in asset prices, as people switch money from bank accounts to stocks and property.
The CSI 300 Index, the benchmark gauge of Chinese companies traded in Shanghai and Shenzhen is valued at 41.09 times earnings. Real estate prices in 70 major cities rose 10.5 percent in December from a year earlier, the fastest increase since at least 2005, when records began.
The economy is awash with money because of record trade surpluses caused by the nation’s role as the world’s assembling and manufacturing hub.
China contributed 20 percent of global growth last year, more than any other nation, according to International Monetary Fund estimates. The IMF expects the world economy to expand 4.1 percent this year, down from 4.9 percent in 2007, on tighter credit and the housing slump that’s undermining U.S. growth.
Lin, the author of more than a dozen books and 100 articles, is due to take up the World Bank role on May 31, replacing Francois Bourguignon, who stepped down in October 2007 after four years in the post. The job has also been held by former U.S. Treasury Secretary Lawrence Summers and Nobel Prize-winning economist Jospeh Stiglitz.
Lin is head of the China Center for Economic Research at Peking University and a member of the NPC, the top legislative body that meets for two weeks in Beijing starting tomorrow.
NEW YORK (AP) - Gold fell sharply Tuesday after crude oil retreated and traders cashed in profits following the metal's flirtation with the historic $1,000 mark. Silver and copper also declined.
Other commodities fell across the board, with corn, wheat, soybean and energy futures all trading lower in a broad futures sell-off.
Gold has gained more than 15 percent this year, driven up by record high oil prices, steep declines in the dollar and worries about a U.S. recession. The most-actively traded April contract hit an intraday high of $992 an ounce on Monday -- a record high and just shy of the psychologically important $1,000 barrier.
Gold's failure to breach the $1,000 mark triggered a sell-off, sending the metal $17.90 lower to settle at $966.30 an ounce Tuesday on the New York Mercantile Exchange. Gold fluctuated widely, trading as high as $990.30 and as low as $958.30.
"Inability to keep the $1,000 level worried latecomers to the party," George Gero, vice president with RBC Capital Markets Global Futures, said in a note. "However, past sell-offs turned out to be a buying opportunity."
Other precious metals also fell Tuesday. Silver for March delivery fell from a 27-year high to settle at $19.738 an ounce, down 33.5 cents on the Nymex. Coper for March delivery slipped 110.4 cents to settle at $3.8270 a pound.
Gold has been on a meteoric rise, soaring nearly 32 percent in 2007. The decline of the 15-nation euro has been a strong driver of the metal, which is viewed as a safe-haven investment in times of rising inflation and economic instability. The euro traded at $1.5209, up from $1.5192 late Monday in New York.
A weak dollar encourages investors to shift funds into hard assets like gold, which are known for holding their value. It also makes dollar-denominated commodities like gold cheaper for overseas buyers.
Gold's fortunes also have been closely linked to crude oil, which fell below $100 Tuesday on the possibility that OPEC will boost production and on expectations that crude inventories are continuing to rise.
"Oil is definitely a part of (gold's decline). If you had seen oil go to $107, you would have seen gold hit $1,000. It's prima facie evidence of where funds are putting their money," said Jon Nadler, analyst with Kitco Bullion Dealers Montreal.
Light, sweet crude for April delivery fell $2.93 to settle at $99.52 a barrel on the Nymex after dropping as low as $98.87 earlier. It was crude's first move below the $100 mark this week and its lowest settlement price since Feb. 25.
Prices rose as high as $103.95 Monday, climbing past the $103.76 price many analysts consider to be the true record high for oil.
Other energy futures also fell Tuesday. April heating oil futures fell 4.9 cents to settle at $2.7918 a gallon on the Nymex, while April gasoline futures dropped 14.29 cents to settle at $2.5291 a gallon.
In agriculture markets, corn and soybeans plummeted a day after hitting record-highs on expectations of growing global demand amid dwindling stockpiles.
Soybeans for May delivery dropped 48.75 cents to settle at $15.1075 a bushel on the Chicago Board of Trade, while March corn lost 12.5 cents to settle at $5.43 a bushel. Wheat, meanwhile, fell 15 cents to settle at $10.875 a bushel on the CBOT.
2212 GMT [Dow Jones] COMMODITY SUMMARY: Base and precious metals down sharply overnight, with talk of profit-taking among a small number of large hedge funds following signs of USD strengthening. Oil prices also sharply down, triggering profit-taking across commodity complex. Base metals could correct lower still: “The group is being viewed not as a proxy of global industrial demand, but instead as an inflation hedge and a lucrative investment choice for portfolio diversification,” says MF Global analyst Edward Meir. “How much longer this can continue is the big question, but we would suggest that the upward spiral evident in a variety of commodity markets, including metals, is assuming bubble-like proportions, and so we would not recommend joining the chase at this late stage.” LME 3-month copper last at $8,365/ton, down $44 vs PM kerb after $161 overnight fall; aluminium at $3,090, down $30; zinc at $2,748, down $32; lead at $3,320.50, down $44.50; nickel at $32,700, down $140; tin unchanged at $19,000. Spot gold also buckles under profit-taking, breaks support at $975/oz but retreat appears overdone, could be buying opportunity, says trader; rise to $1,000 remains on the cards. Spot gold at $963.70, down $21.05 on London PM fix; silver at $19.75, down 57 cents on Tuesday fix; platinum at $2,222.50, down $50.50; palladium at $543.00, down $39. Nymex crude futures slump $2.93 to $99.52/bbl. (EFB)
It was quite disappointing to see the Hang Seng Index being unable to maintain its key support level at 23,500 yesterday even as HSBC Holdings (0005) rose. As expected, once this key level was broken, more selling pressure followed. This was what happened in mid-January when the HSI dropped below 26,000. I am afraid there may be another round of sell-offs that would push the index down to test the 20,000 level. Warren Buffet said the US economy is basically in recession. A friend of Dr Check believes there is too much bearish news. If all financial institutions need to finally write down a total of US$650 billion (HK$5.07 trillion) in this subprime crisis, it may take another quarter for the problem to ease as writeoffs so far amount to only US$130 billion. If the general sentiment inclines to be bearish, big derivatives players will prefer to see shares go further south. Fund managers have to wait for a cheaper level and will only buy defensive plays in utilities.
Dow Jones] Singapore-listed China shares mostly lower, tracking weakness in Shanghai market, following Chinese premier Wen Jiabao''s speech at National People''s Congress that country faces rising economic risks from inflation, global slowdown. FTSE ST China Index down 2.6% at 483.56 (STI off 0.5%). Wen blames rising international prices for grain, oil for higher inflation in China; adds increased bank lending contributing to spike in property prices. "Wen''s comments are weighing on China stocks here," says foreign house dealer. Major decliners include Cosco (F83.SG) off 4.4% at S$3.46, Yangzijiang (BS6.SG) off 5.4% at S$0.955, China Sports International (CP6.SG) off 6.5% at S$1.01. Local house dealer says while S-shares recently sold down 30%-40%, they''re unlikely to rebound soon; "there''s no reason for them to run up." (FKH)
0434 GMT [Dow Jones] Singapore palm oil stocks largely lower after crude palm oil (CPO) prices tumbled on talk China will move to curb vegetable oil prices. Indofood Agri Resources (5JS.SG) down 7% at S$2.37; Golden Agri-Resources (G17.SG) down 8.2% at S$1.01; First Resources (EB5.SG) down 7.1% at S$1.45. But Wilmar (F34.SG) bucking gloom +3.4% at S$4.30 after Morgan Stanley initiates stock at Overweight. Speculation mounting that China will increase supply of vegetable oils into domestic market by releasing stock from reserves; news hit soyoil, CPO prices. Bursa Malaysia Derivatives CPO contract for May delivery trading at MYR3,947/ton today, down sharply from yesterday's record intraday high of MYR4,486/ton. But relatively low volume of shares traded in palm stocks suggests selling pressure light, downside limited. (KIG)
Banks are close to working out a rescue plan for troubled bond insurer Ambac Financial Group, though no deal has been reached yet, according to people familiar with the matter.
Talks are expected to continue through the night, and the banks hope to reach an agreement by Wednesday morning. Ambac's stock rose sharply on CNBC's report that that a deal was close, though there is always the danger that the talks could fall apart at the last minute.
Like other bond insurers, Ambac is in danger of losing its critical triple A debt rating unless it raises enough capital to offset billions of dollars in losses from risky subprime related debt.
As first reported by CNBC, the bailout effort ran into trouble last week when the bond rating agencies said they wanted to see more capital injected into the bond insurer. A consortium of banks had already agreed to come up with $2.5 billion in capital.
One possibility is to have Ambac raise more capital by issuing more stock through a secondary rights offering. The banks also are willing to consider leaving the bond insurer with just a single "triple-A" credit rating, according to people involved in the deal. In the past, the bank consortium had wanted two triple-A ratings to underwrite new business.
People close to the proposed bailout remain confident a deal will still happen. Banks and the rating agencies are aware that if Ambac collapses, it would trigger another wave of panic in debt markets and send the stock market reeling.
WASHINGTON — However much they might oppose it on ideological grounds, the Bush administration and the Federal Reserve are inching closer toward a government rescue of distressed homeowners and mortgage lenders.
Ben S. Bernanke, the Fed chairman, told a group of bankers in Florida on Tuesday that “more can and should be done” to help millions of people with mortgages that are often bigger than the value of their homes.
Though Mr. Bernanke stopped well short of calling for a government bailout, he used his bully pulpit to try to push the banking industry into forgiving portions of many mortgages and signaled his concern that market forces would not be enough to prevent a broader economic calamity.
He also suggested that the Federal Housing Administration expand its insurance program to let more people switch from expensive subprime mortgages to federally insured loans.
And he urged the two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, to raise more capital so they could buy more mortgages. The companies already guarantee or hold as investments about $1.5 trillion in mortgages.
Similarly, the Bush administration, despite its public opposition to bailouts, has set the stage for a bigger government role.
One month ago, President Bush signed an economic stimulus bill that greatly increased the size of loans the F.H.A. can insure, while allowing Fannie Mae and Freddie Mac to purchase significantly larger mortgages from lenders and guarantee them against default by homeowners.
The move, which administration officials had previously opposed, increases the limits on F.H.A., Freddie Mac and Fannie Mae mortgages from $417,000 to as much as $729,750.
Historically, the F.H.A. and the mortgage companies have focused on conservative mortgages for people borrowing relatively modest sums. But they are now being encouraged to finance much bigger mortgages, in some cases to people who put almost no money down.
Last week, the administration went further by removing limits on the volume of mortgages that Fannie Mae and Freddie Mac can hold in their own portfolios. That means the two companies could buy up billions of dollars in mortgages that other investors have been too frightened to touch.
In theory, the change should not cost taxpayers. But because the companies are chartered by Congress, investors have assumed that Congress would bail them out if needed. Fannie Mae and Freddie Mac can borrow money more cheaply than private banks largely because of the assumed government backing.
The Fed has been offering its own resources to soften the credit squeeze that began when investors started to panic about subprime loans. In addition to sharply cutting interest rates, the Fed has lent more than $160 billion to banks since mid-December through a new program, the Term Auction Facility.
Under the program, banks have been able to borrow money for up to a month or so, pledging collateral that includes mortgage-backed securities, even if the securities are not tradable in today’s markets.
In Congress, Democratic lawmakers pounced on Mr. Bernanke’s comments in Orlando, Fla., to bolster their arguments for much costlier rescue plans.
“It is now clear that we will not be able to avert a more serious and prolonged economic slowdown if we don’t address the problem of increasing mortgage foreclosures,” Representative Barney Frank, chairman of the House Financial Services Committtee, said on Tuesday.
Mr. Frank, who praised the Fed chairman’s “willingness to work with us,” proposed legislation last week to allow the F.H.A. to insure up to $20 billion in troubled mortgages if the lenders first agree to forgive a big part of the original loan amounts.
But even without new legislation, the Federal Housing Administration has been active. It has insured 110,000 mortgage refinancings worth $15 billion since it started a program, F.H.A. Secure, in October. It is hard to know how many of the loans would have come to the agency because of the mortgage crisis, but officials estimate as many as 90 percent of the borrowers were previously in subprime loans.
The F.H.A. figures prominently in the proposals being put forth by regulators and lawmakers. The agency insures mortgage loans made by approved lenders.
A longstanding bill to modernize the program would lower the down payment needed for F.H.A. loans to 1.5 percent of a home’s value, from 3 percent. The bill would also let the agency price insurance based on each loan’s risks. The F.H.A. now charges everyone the same premium.
“We will not back loans that do not make sense and cost taxpayers money,” said D. J. Nordquist, a spokeswoman for the Department of Housing and Urban Development, which runs the F.H.A.
But skeptics worry that the plans to expand the scope of the F.H.A. will put taxpayers at risk. They note that home prices are likely to fall further. If the government moves to insure or buy mortgages now, it might help arrest the price decline — but only temporarily.
“The reality is, prices will fall; there is no way to keep them up,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal group in Washington. “If we have the government get in, either as the owner of the debt or the guarantor of the debt, a lot of the decline will be shouldered by the taxpayer.”
Created during the Depression to support the mortgage market, the F.H.A. has played a critical role in the housing industry in the past, though in recent years it lost ground to subprime lenders.
Administration officials say the program was meant to step in during tumultuous times like these. They further note that its conservative underwriting standards will ensure that the F.H.A. program’s losses will be within its traditional range.
Congress and the Bush administration are also hoping to soften the mortgage debacle through Fannie Mae and Freddie Mac.
Even before President Bush signed legislation allowing the two government-sponsored companies to guarantee mortgages as big as $729,750 in high-cost markets, Fannie Mae had begun offering personal loans to some borrowers who were behind on their house payments. Known as HomeSaver Advance, the loans could help Fannie Mae keep mortgages current for borrowers who have a temporary setback.
The two companies are now trying to decide how to guarantee the bigger and potentially riskier mortgages. Both want to exclude “no-documentation” loans, but Congress authorized them to buy up big mortgages going back to last July — when a high percentage of such loans were approved without verification of the borrower’s income. As a result, company executives are debating whether to buy up at least some “no-doc” loans made last year.
“One could argue that these things are steps on the bailout continuum, although they are baby steps,” said Karen Weaver, head of securitization research at Deutsche Bank.
Democratic leaders in Congress are pushing for bolder action. The House speaker, Nancy Pelosi, will hold a closed meeting on Wednesday with some of the leading advocates for more extensive rescue measures.
Administration officials remain opposed, but some are at least discussing such ideas.
“Whether government intervention is necessary is something we should all be thinking about,” Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, said at a hearing of the Senate Banking Committee on Tuesday. “But I don’t think we are there yet.”
The first commodities index built to allow investors to profit from rising food inflation is due to be launched today .
The UBS Bloomberg Constant Maturity Commodity Food Index will cover 13 commodities directly linked to food consumption.
It will include raw materials not usually included in general commodity indices, such as high-quality winter red wheat, soyameal, soy oil, orange juice and lean hogs.
Morgan Metters, head of commodity index structuring at UBS in London, said food prices had seen the biggest annual increase in several decades, contributing to high inflation in many economies, notably China.
“Awareness of the link between commodity prices and inflation has increased significantly over the last six months,” Mr Metters said.
Other investment banks have launched agriculture-related indices that also give exposure to food prices.
Agricultural commodities have risen amid demand from developing countries, rising population, more floods and droughts, and the biofuels industry’s appetite.
The US Department of Agriculture last month forecast that prices would continue to rise this year.
“The index was developed in response to a growing demand from investors looking to hedge against this price inflation as well as from those looking to buy food-related commodities for diversification purposes,” Mr Metters said.
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China Should Raise Rates, World Bank Economist Says
March 4 (Bloomberg) -- China should raise interest rates to curb the fastest inflation in 11 years and rein in stock and property prices, said Justin Lin Yifu, the World Bank’s next chief economist.
“If the central bank doesn’t raise interest rates, real deposit rates will be negative,” Lin told reporters in Beijing at a meeting to prepare for the National People’s Congress tomorrow. “I advocate China keeping interest rates flexible to keep real rates positive and to control asset prices.”
China has kept rates on hold this year after six increases in 2007 as the central bank assesses the impact of snowstorms in January, weakening U.S. export demand and a declining stock market. Inflation has reached 7.1 percent while the CSI 300 Index of stocks, after retreating 13 percent this year, has still more than doubled since the start of 2007.
“The central bank may need to raise rates as soon as this month because inflation may have been even higher in February because of the disruptions from snowstorms,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. Deposit rates may rise more than lending rates, said Xing, who expects February’s inflation rate to be 8.5 percent.
China’s key lending and deposit rates are at nine-year highs of 7.47 percent and 4.14 percent. The most recent increase took effect Dec. 21.
CSI 300 Index
Inflation higher than deposit rates makes it harder for the government to rein in asset prices, as people switch money from bank accounts to stocks and property.
The CSI 300 Index, the benchmark gauge of Chinese companies traded in Shanghai and Shenzhen is valued at 41.09 times earnings. Real estate prices in 70 major cities rose 10.5 percent in December from a year earlier, the fastest increase since at least 2005, when records began.
The economy is awash with money because of record trade surpluses caused by the nation’s role as the world’s assembling and manufacturing hub.
China contributed 20 percent of global growth last year, more than any other nation, according to International Monetary Fund estimates. The IMF expects the world economy to expand 4.1 percent this year, down from 4.9 percent in 2007, on tighter credit and the housing slump that’s undermining U.S. growth.
Lin, the author of more than a dozen books and 100 articles, is due to take up the World Bank role on May 31, replacing Francois Bourguignon, who stepped down in October 2007 after four years in the post. The job has also been held by former U.S. Treasury Secretary Lawrence Summers and Nobel Prize-winning economist Jospeh Stiglitz.
Lin is head of the China Center for Economic Research at Peking University and a member of the NPC, the top legislative body that meets for two weeks in Beijing starting tomorrow.
Gold plummets on profit-taking
March 4, 2008
NEW YORK (AP) - Gold fell sharply Tuesday after crude oil retreated and traders cashed in profits following the metal's flirtation with the historic $1,000 mark. Silver and copper also declined.
Other commodities fell across the board, with corn, wheat, soybean and energy futures all trading lower in a broad futures sell-off.
Gold has gained more than 15 percent this year, driven up by record high oil prices, steep declines in the dollar and worries about a U.S. recession. The most-actively traded April contract hit an intraday high of $992 an ounce on Monday -- a record high and just shy of the psychologically important $1,000 barrier.
Gold's failure to breach the $1,000 mark triggered a sell-off, sending the metal $17.90 lower to settle at $966.30 an ounce Tuesday on the New York Mercantile Exchange. Gold fluctuated widely, trading as high as $990.30 and as low as $958.30.
"Inability to keep the $1,000 level worried latecomers to the party," George Gero, vice president with RBC Capital Markets Global Futures, said in a note. "However, past sell-offs turned out to be a buying opportunity."
Other precious metals also fell Tuesday. Silver for March delivery fell from a 27-year high to settle at $19.738 an ounce, down 33.5 cents on the Nymex. Coper for March delivery slipped 110.4 cents to settle at $3.8270 a pound.
Gold has been on a meteoric rise, soaring nearly 32 percent in 2007. The decline of the 15-nation euro has been a strong driver of the metal, which is viewed as a safe-haven investment in times of rising inflation and economic instability. The euro traded at $1.5209, up from $1.5192 late Monday in New York.
A weak dollar encourages investors to shift funds into hard assets like gold, which are known for holding their value. It also makes dollar-denominated commodities like gold cheaper for overseas buyers.
Gold's fortunes also have been closely linked to crude oil, which fell below $100 Tuesday on the possibility that OPEC will boost production and on expectations that crude inventories are continuing to rise.
"Oil is definitely a part of (gold's decline). If you had seen oil go to $107, you would have seen gold hit $1,000. It's prima facie evidence of where funds are putting their money," said Jon Nadler, analyst with Kitco Bullion Dealers Montreal.
Light, sweet crude for April delivery fell $2.93 to settle at $99.52 a barrel on the Nymex after dropping as low as $98.87 earlier. It was crude's first move below the $100 mark this week and its lowest settlement price since Feb. 25.
Prices rose as high as $103.95 Monday, climbing past the $103.76 price many analysts consider to be the true record high for oil.
Other energy futures also fell Tuesday. April heating oil futures fell 4.9 cents to settle at $2.7918 a gallon on the Nymex, while April gasoline futures dropped 14.29 cents to settle at $2.5291 a gallon.
In agriculture markets, corn and soybeans plummeted a day after hitting record-highs on expectations of growing global demand amid dwindling stockpiles.
Soybeans for May delivery dropped 48.75 cents to settle at $15.1075 a bushel on the Chicago Board of Trade, while March corn lost 12.5 cents to settle at $5.43 a bushel. Wheat, meanwhile, fell 15 cents to settle at $10.875 a bushel on the CBOT.
2212 GMT [Dow Jones] COMMODITY SUMMARY: Base and precious metals down sharply overnight, with talk of profit-taking among a small number of large hedge funds following signs of USD strengthening. Oil prices also sharply down, triggering profit-taking across commodity complex. Base metals could correct lower still: “The group is being viewed not as a proxy of global industrial demand, but instead as an inflation hedge and a lucrative investment choice for portfolio diversification,” says MF Global analyst Edward Meir. “How much longer this can continue is the big question, but we would suggest that the upward spiral evident in a variety of commodity markets, including metals, is assuming bubble-like proportions, and so we would not recommend joining the chase at this late stage.” LME 3-month copper last at $8,365/ton, down $44 vs PM kerb after $161 overnight fall; aluminium at $3,090, down $30; zinc at $2,748, down $32; lead at $3,320.50, down $44.50; nickel at $32,700, down $140; tin unchanged at $19,000. Spot gold also buckles under profit-taking, breaks support at $975/oz but retreat appears overdone, could be buying opportunity, says trader; rise to $1,000 remains on the cards. Spot gold at $963.70, down $21.05 on London PM fix; silver at $19.75, down 57 cents on Tuesday fix; platinum at $2,222.50, down $50.50; palladium at $543.00, down $39. Nymex crude futures slump $2.93 to $99.52/bbl. (EFB)
It was quite disappointing to see the Hang Seng Index being unable to maintain its key support level at 23,500 yesterday even as HSBC Holdings (0005) rose. As expected, once this key level was broken, more selling pressure followed. This was what happened in mid-January when the HSI dropped below 26,000. I am afraid there may be another round of sell-offs that would push the index down to test the 20,000 level. Warren Buffet said the US economy is basically in recession. A friend of Dr Check believes there is too much bearish news. If all financial institutions need to finally write down a total of US$650 billion (HK$5.07 trillion) in this subprime crisis, it may take another quarter for the problem to ease as writeoffs so far amount to only US$130 billion. If the general sentiment inclines to be bearish, big derivatives players will prefer to see shares go further south. Fund managers have to wait for a cheaper level and will only buy defensive plays in utilities.
Dow Jones] Singapore-listed China shares mostly lower, tracking weakness in Shanghai market, following Chinese premier Wen Jiabao''s speech at National People''s Congress that country faces rising economic risks from inflation, global slowdown. FTSE ST China Index down 2.6% at 483.56 (STI off 0.5%). Wen blames rising international prices for grain, oil for higher inflation in China; adds increased bank lending contributing to spike in property prices. "Wen''s comments are weighing on China stocks here," says foreign house dealer. Major decliners include Cosco (F83.SG) off 4.4% at S$3.46, Yangzijiang (BS6.SG) off 5.4% at S$0.955, China Sports International (CP6.SG) off 6.5% at S$1.01. Local house dealer says while S-shares recently sold down 30%-40%, they''re unlikely to rebound soon; "there''s no reason for them to run up." (FKH)
Only Human (一公升的眼泪主题曲插曲)
作詞 小山内舞
作曲 松尾潔/田中直 唄 K
哀しみの向こう岸に 微笑みがあるというよ
哀しみの向こう岸に 微笑みがあるというよ
たどり着くその先には 何が僕らを待ってる?
逃げるためじゃなく 夢追うために
旅に出たはずさ 遠い夏のあの日
明日さえ見えたなら ため息もないけど
流れに逆らう舟のように
今は 前へ 進め
苦しみの尽きた場所に 幸せが待つというよ
僕はまだ探している 季節はずれの向日葵
こぶし握りしめ 朝日を待てば
赤い爪あとに 涙 キラリ 落ちる
孤独にも慣れたなら 月明かり頼りに
羽根なき翼で飛び立とう
もっと 前へ 進め
雨雲が切れたなら 濡れた道 かがやく
闇だけが教えてくれる
強い 強い 光
強く 前へ 進め
0434 GMT [Dow Jones] Singapore palm oil stocks largely lower after crude palm oil (CPO) prices tumbled on talk China will move to curb vegetable oil prices. Indofood Agri Resources (5JS.SG) down 7% at S$2.37; Golden Agri-Resources (G17.SG) down 8.2% at S$1.01; First Resources (EB5.SG) down 7.1% at S$1.45. But Wilmar (F34.SG) bucking gloom +3.4% at S$4.30 after Morgan Stanley initiates stock at Overweight. Speculation mounting that China will increase supply of vegetable oils into domestic market by releasing stock from reserves; news hit soyoil, CPO prices. Bursa Malaysia Derivatives CPO contract for May delivery trading at MYR3,947/ton today, down sharply from yesterday's record intraday high of MYR4,486/ton. But relatively low volume of shares traded in palm stocks suggests selling pressure light, downside limited. (KIG)
Banks Hope to Reach Deal Soon on Ambac Rescue
Banks are close to working out a rescue plan for troubled bond insurer Ambac Financial Group, though no deal has been reached yet, according to people familiar with the matter.
Talks are expected to continue through the night, and the banks hope to reach an agreement by Wednesday morning. Ambac's stock rose sharply on CNBC's report that that a deal was close, though there is always the danger that the talks could fall apart at the last minute.
Like other bond insurers, Ambac is in danger of losing its critical triple A debt rating unless it raises enough capital to offset billions of dollars in losses from risky subprime related debt.
As first reported by CNBC, the bailout effort ran into trouble last week when the bond rating agencies said they wanted to see more capital injected into the bond insurer. A consortium of banks had already agreed to come up with $2.5 billion in capital.
One possibility is to have Ambac raise more capital by issuing more stock through a secondary rights offering. The banks also are willing to consider leaving the bond insurer with just a single "triple-A" credit rating, according to people involved in the deal. In the past, the bank consortium had wanted two triple-A ratings to underwrite new business.
People close to the proposed bailout remain confident a deal will still happen. Banks and the rating agencies are aware that if Ambac collapses, it would trigger another wave of panic in debt markets and send the stock market reeling.
Bush and Fed Step Toward a Mortgage Rescue
WASHINGTON — However much they might oppose it on ideological grounds, the Bush administration and the Federal Reserve are inching closer toward a government rescue of distressed homeowners and mortgage lenders.
Ben S. Bernanke, the Fed chairman, told a group of bankers in Florida on Tuesday that “more can and should be done” to help millions of people with mortgages that are often bigger than the value of their homes.
Though Mr. Bernanke stopped well short of calling for a government bailout, he used his bully pulpit to try to push the banking industry into forgiving portions of many mortgages and signaled his concern that market forces would not be enough to prevent a broader economic calamity.
He also suggested that the Federal Housing Administration expand its insurance program to let more people switch from expensive subprime mortgages to federally insured loans.
And he urged the two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, to raise more capital so they could buy more mortgages. The companies already guarantee or hold as investments about $1.5 trillion in mortgages.
Similarly, the Bush administration, despite its public opposition to bailouts, has set the stage for a bigger government role.
One month ago, President Bush signed an economic stimulus bill that greatly increased the size of loans the F.H.A. can insure, while allowing Fannie Mae and Freddie Mac to purchase significantly larger mortgages from lenders and guarantee them against default by homeowners.
The move, which administration officials had previously opposed, increases the limits on F.H.A., Freddie Mac and Fannie Mae mortgages from $417,000 to as much as $729,750.
Historically, the F.H.A. and the mortgage companies have focused on conservative mortgages for people borrowing relatively modest sums. But they are now being encouraged to finance much bigger mortgages, in some cases to people who put almost no money down.
Last week, the administration went further by removing limits on the volume of mortgages that Fannie Mae and Freddie Mac can hold in their own portfolios. That means the two companies could buy up billions of dollars in mortgages that other investors have been too frightened to touch.
In theory, the change should not cost taxpayers. But because the companies are chartered by Congress, investors have assumed that Congress would bail them out if needed. Fannie Mae and Freddie Mac can borrow money more cheaply than private banks largely because of the assumed government backing.
The Fed has been offering its own resources to soften the credit squeeze that began when investors started to panic about subprime loans. In addition to sharply cutting interest rates, the Fed has lent more than $160 billion to banks since mid-December through a new program, the Term Auction Facility.
Under the program, banks have been able to borrow money for up to a month or so, pledging collateral that includes mortgage-backed securities, even if the securities are not tradable in today’s markets.
In Congress, Democratic lawmakers pounced on Mr. Bernanke’s comments in Orlando, Fla., to bolster their arguments for much costlier rescue plans.
“It is now clear that we will not be able to avert a more serious and prolonged economic slowdown if we don’t address the problem of increasing mortgage foreclosures,” Representative Barney Frank, chairman of the House Financial Services Committtee, said on Tuesday.
Mr. Frank, who praised the Fed chairman’s “willingness to work with us,” proposed legislation last week to allow the F.H.A. to insure up to $20 billion in troubled mortgages if the lenders first agree to forgive a big part of the original loan amounts.
But even without new legislation, the Federal Housing Administration has been active. It has insured 110,000 mortgage refinancings worth $15 billion since it started a program, F.H.A. Secure, in October. It is hard to know how many of the loans would have come to the agency because of the mortgage crisis, but officials estimate as many as 90 percent of the borrowers were previously in subprime loans.
The F.H.A. figures prominently in the proposals being put forth by regulators and lawmakers. The agency insures mortgage loans made by approved lenders.
A longstanding bill to modernize the program would lower the down payment needed for F.H.A. loans to 1.5 percent of a home’s value, from 3 percent. The bill would also let the agency price insurance based on each loan’s risks. The F.H.A. now charges everyone the same premium.
“We will not back loans that do not make sense and cost taxpayers money,” said D. J. Nordquist, a spokeswoman for the Department of Housing and Urban Development, which runs the F.H.A.
But skeptics worry that the plans to expand the scope of the F.H.A. will put taxpayers at risk. They note that home prices are likely to fall further. If the government moves to insure or buy mortgages now, it might help arrest the price decline — but only temporarily.
“The reality is, prices will fall; there is no way to keep them up,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal group in Washington. “If we have the government get in, either as the owner of the debt or the guarantor of the debt, a lot of the decline will be shouldered by the taxpayer.”
Created during the Depression to support the mortgage market, the F.H.A. has played a critical role in the housing industry in the past, though in recent years it lost ground to subprime lenders.
Administration officials say the program was meant to step in during tumultuous times like these. They further note that its conservative underwriting standards will ensure that the F.H.A. program’s losses will be within its traditional range.
Congress and the Bush administration are also hoping to soften the mortgage debacle through Fannie Mae and Freddie Mac.
Even before President Bush signed legislation allowing the two government-sponsored companies to guarantee mortgages as big as $729,750 in high-cost markets, Fannie Mae had begun offering personal loans to some borrowers who were behind on their house payments. Known as HomeSaver Advance, the loans could help Fannie Mae keep mortgages current for borrowers who have a temporary setback.
The two companies are now trying to decide how to guarantee the bigger and potentially riskier mortgages. Both want to exclude “no-documentation” loans, but Congress authorized them to buy up big mortgages going back to last July — when a high percentage of such loans were approved without verification of the borrower’s income. As a result, company executives are debating whether to buy up at least some “no-doc” loans made last year.
“One could argue that these things are steps on the bailout continuum, although they are baby steps,” said Karen Weaver, head of securitization research at Deutsche Bank.
Democratic leaders in Congress are pushing for bolder action. The House speaker, Nancy Pelosi, will hold a closed meeting on Wednesday with some of the leading advocates for more extensive rescue measures.
Administration officials remain opposed, but some are at least discussing such ideas.
“Whether government intervention is necessary is something we should all be thinking about,” Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, said at a hearing of the Senate Banking Committee on Tuesday. “But I don’t think we are there yet.”
UBS index to focus on food inflation
The first commodities index built to allow investors to profit from rising food inflation is due to be launched today .
The UBS Bloomberg Constant Maturity Commodity Food Index will cover 13 commodities directly linked to food consumption.
It will include raw materials not usually included in general commodity indices, such as high-quality winter red wheat, soyameal, soy oil, orange juice and lean hogs.
Morgan Metters, head of commodity index structuring at UBS in London, said food prices had seen the biggest annual increase in several decades, contributing to high inflation in many economies, notably China.
“Awareness of the link between commodity prices and inflation has increased significantly over the last six months,” Mr Metters said.
Other investment banks have launched agriculture-related indices that also give exposure to food prices.
Agricultural commodities have risen amid demand from developing countries, rising population, more floods and droughts, and the biofuels industry’s appetite.
The US Department of Agriculture last month forecast that prices would continue to rise this year.
“The index was developed in response to a growing demand from investors looking to hedge against this price inflation as well as from those looking to buy food-related commodities for diversification purposes,” Mr Metters said.
www.ft.com/foodprices
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