NEW YORK (MarketWatch) -- Self-deception and a lack of control are the chief reasons for many poor spending decisions, and whiny explanations about wasteful purchases are nothing more than excuses for bad spending behaviour.
If you are an impulse shopper who simply can’t stop throwing money around, recognizing some of the common lies people tell themselves to justify their spending could help you rein in your urges, says syndicated personal finance columnist Gregory Karp. In his new book “Living Rich by Spending Smart,” he lists six clichés that freewheeling spenders treat as mantras:
1. I could die tomorrow, so I’ll live for today. This immature attitude justifies actions of the buy-it-now and pay-for-it-whenever class. It’s the primary excuse for not saving money.
2. I work hard, I deserve it. This is akin to a four-year-old throwing a tantrum in a toy store crying “Gimme, gimme.” While it is true that many Americans are overworked and that you have to treat yourself occasionally, self-gifting is more prominent today because of advertising pitches to buy things “because you deserve them.” You also deserve to live out a retirement that doesn’t include regular helpings of Alpo.
3. I don’t have a head for numbers. This is the excuse given for not paying attention to personal finances. But managing money doesn’t require complicated mathematics. Consumers now have a plethora of free online tools to help with all sorts of financial planning. Be happy to do smart things with your money, if they aren’t the absolute best you can do. Often, the absolute best involves more risk than you should be taking.
4. I’m too busy to compare prices or manage money. This might be true for a small fraction of people, says Karp, but mostly it’s a lie. Shutting off the TV one night a week will provide most people plenty of time to manage their finances. For those truly time-strapped, consider hiring a good financial adviser. It’s more costly than managing your finances yourself, but better than doing nothing.
5. It’s an investment. Most consumer purchases aren’t investments, because almost all of them plummet in value the moment you leave the store. So you don’t “invest” in a car, a plasma TV or a new pair of shoes unless somehow they’ll make you money. They are expenses. Pacifying your self-guilt by calling them an investment is self-delusion.
6. I don’t earn enough to save money. Saving is not about what you earn, it’s about what you keep. If your paycheck truly covers only the cost of bare necessities, you have an income problem. It’s time to work more hours or earn more with the hours you work.
High-rolling gamblers may soon be cashing in their chips with the great casino in the sky.
Airbus has been approached by potential Asian buyers who are looking to turn its A380 “superjumbo” aircraft into a flying casino, says the European aircraft-maker.
François Chazelle, who heads the Airbus executive and private aviation division, said: “Discussions are under way, and not just with casino operators.” Should the talks lead to an order soon, a fully-fitted casino A380 could be delivered between 2012 and 2017, he said.
“This [gambling] is clearly a growing business in Asia and what this interest reflects is what is happening in Macao and Singapore,” he said. “The idea of a flying casino has been mentioned before but it’s now looking a lot more concrete.”
Macao has overtaken Las Vegas as the world’s biggest gaming centre, while Singapore is planning to open its first casino next year.
However, there are strict curbs, or outright casino bans, on gambling in much of Asia, including Thailand and mainland China. Nevertheless, operators have long offered gambling-boat cruises out of cities such as Hong Kong into international waters.
Mr Chazelle said the legal loophole aspect was “certainly a factor but I think it is more about the attraction of being able to offer such an extraordinary activity”. He said the A380 was the first aircraft large enough for a full-fledged casino operation. “If this could have worked before, I’m sure it would have,” he said.
The Airbus talks also follow recent reports that US gaming operator Sands is planning an air link between its Venetian casinos in Las Vegas and Macao that will allow passengers to play baccarat on two private jets. Mr Chazelle would not name possible casino clients for the A380 and whether Sands was among them.
Contacted on Wednesday, Macao-based gaming executives said they were not aware that any of the territory’s six licensed operators had entered discussions to purchase a flying casino. “It would give ‘fiscal flight’ a whole new meaning,” said one sceptical casino executive, who noted potential government concerns that aerial gaming would be unregulated and untaxed.
Daniel Lehnberg, business development manager for the Asia Pacific Poker Tour, which last year arranged Macao’s first Texas Hold’em tournament, said governments would most probably want to enforce new laws if flying casinos were to develop.
Asian Stocks Advance as Economic Concerns Ease; Toyota Climbs
By Chen Shiyin and Ian C. Sayson
Feb. 14 (Bloomberg) -- Asian stocks rose, sending the region's benchmark to its biggest advance in three weeks. Banks and technology companies gained as Japan's economic growth accelerated and U.S. retail sales unexpectedly gained.
Mizuho Financial Group Inc. climbed for the first time in seven days after Japanese gross domestic product expanded at the quickest pace in three quarters. Samsung Electronics Co. and Toyota Motor Corp. led companies that rely on U.S. revenue higher. Rio Tinto Group jumped after reporting higher profit.
``The development in Japan is one of the positive snippets of news that helped turn market sentiment,'' said Don Williams, who helps manage $1.3 billion at Platypus Asset Management in Sydney. ``The U.S. is a very important economy for most markets in the region and the retail report coming out there provides a bigger source of optimism.''
The MSCI Asia Pacific Index added 3.7 percent to 143.89 at 3:23 p.m. in Tokyo, as all 10 industry groups gained. Concerns that worldwide economic expansion will slow amid mounting losses related to U.S. subprime-mortgage investments have dragged the benchmark down by 8.8 percent this year.
Japan's Nikkei 225 Stock Average jumped 4.3 percent, the biggest climb since March 2002. Benchmarks rose elsewhere in the region except in the Philippines. Incitec Pivot Ltd., Australia's largest fertilizer maker, and STX Pan Ocean Co., South Korea's biggest commodity-shipping line, led gains among shares that will be added to MSCI Inc.'s global indexes.
Japan's Growth
U.S. stocks rose yesterday for a third day, the longest stretch of gains this year, as increased demand at Applied Materials Inc., the No. 1 maker of semiconductor-production machines, spurred a rally in technology shares.
Mizuho, Japan's third-largest publicly traded bank by market value, added 4.2 percent to 443,000 yen, halting a six- day, 14 percent drop. Sumitomo Mitsui Financial Group Inc., the second-biggest, rose 3 percent to 785,000 yen.
Japan's economic growth accelerated to 3.7 percent last quarter from a revised 1.3 percent annualized expansion in the third quarter, the Cabinet Office said today. The median estimate of 39 economists surveyed by Bloomberg News was for growth of 1.7 percent.
Positive Evidence
Meanwhile, U.S. retail sales climbed 0.3 percent in January on increased spending on autos, clothes and gasoline. Economists in a Bloomberg survey had expected a drop of 0.3 percent.
``The Japanese number was surprisingly strong, while better-than-expected U.S. retail sales could help prevent'' the economy from contracting, said Shane Oliver, who helps manage the equivalent of $113 billion at AMP Capital Investors in Sydney. ``We're not likely to see a protracted bear market.''
Other signs Asia is weathering a U.S. slowdown have emerged this week. Australia's statistics bureau said today the nation's unemployment rate fell to the lowest since 1974. Consumer confidence in South Korea rose to the highest in more than five years, the government said on Feb. 12.
Samsung, the world's biggest computer-memory maker, climbed 3.3 percent to 593,000 won. Hon Hai Precision Industry Co., a maker of Apple Inc.'s iPods, climbed 6.7 percent to NT$174.50. Li & Fung Ltd., a Hong Kong-based supplier to Wal-Mart Stores Inc., advanced 4.9 percent to HK$29.05.
MSCI Additions
Toyota, Japan's largest automaker, rose 2.2 percent to 6,000 yen. The company got 37 percent of its sales in its last business year from North America. Nissan Motor Co., the third- biggest, jumped 4.7 percent to 966 yen.
Rio Tinto, the world's third-biggest mining company, climbed 4 percent to A$133.77, its highest close since Jan. 2. Rio said second-half profit rose 11 percent to $4.06 billion on record iron-ore production and its acquisition of Alcan Inc.
Tokyo Electron Ltd., the world's second-largest maker of semiconductor equipment, jumped 6.2 percent to 6,900 yen. The Nikkei newspaper said the company may post higher-than-forecast earnings. Nippon Sheet Glass Co. surged 12 percent to 501 yen, the fourth-biggest advance on the MSCI World Index, after reporting an 18 percent increase in third-quarter net income.
In Australia, Incitec Pivot gained 4.9 percent to A$138.70 after MSCI said the company was among eight Asian stocks chosen to join its benchmarks this month.
STX Pan Ocean jumped 15 percent to 2,050 won. Sydney-based Sims Group Ltd., the world's biggest recycler of scrap metal, rose 1.8 percent to A$31.55. It was also added to MSCI indexes.
Centro Retail Group, among three stocks deleted from the index compiler's benchmarks, slumped 9.8 percent to 37 Australian cents, taking its slide in the past six months to 79 percent. The company is a unit of Centro Properties Group, an owner of more than 700 U.S. malls that put itself up for sale.
Toda Corp. plunged 12 percent to 420 yen, the biggest decline in at least 10 years and the largest decline on the MSCI World Index. The Japanese general contractor cut its full-year profit forecast by 28 percent.
UBS Posts Record Loss After $13.7 Billion Writedowns (Update2)
By Elena Logutenkova
Feb. 14 (Bloomberg) -- UBS AG posted the biggest ever loss by a bank in the fourth quarter after $13.7 billion in writedowns on securities infected by U.S. subprime mortgages.
Europe's largest bank by assets had a net loss of 12.5 billion Swiss francs ($11.3 billion), compared with a profit of 3.4 billion francs a year ago, the Zurich-based company said today. UBS reported on Jan. 30 a preliminary loss of about 12.5 billion francs for the period, after increasing writedowns.
Chief Executive Officer Marcel Rohner, on a conference call with journalists, described the results as ``unacceptable'' and declined to predict whether the bank will return to profit in the first quarter. Rising U.S. subprime-mortgage defaults led to more than $145 billion in writedowns and loan losses at the world's biggest financial companies. The Group of Seven nations estimates the markdowns may swell to $400 billion, German Finance Minister Peer Steinbrueck said on Feb. 9.
``The rot is spreading to other residential areas,'' ABN Amro Holding NV analysts Kinner Lakhani and Omar Fall said in a note to clients last week. They recommend investors ``avoid'' UBS shares and forecast as much as $10.8 billion of possible further writedowns at the bank.
UBS slumped 36 percent in Zurich trading in the past six months, making it the sixth-worst performer in the 60-member Bloomberg Europe Banks and Financial Services Index, which lost 23 percent.
New Investment Bank Head
UBS's writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime and prime, and $871 million on credit protection purchased from monoline insurers. The bank recorded losses of about $500 million on commercial real estate and about $200 million on loans for leveraged buyouts.
UBS reiterated today that 2008 will be ``another difficult year.''
The wealth management and business banking division raised fourth-quarter profit 12 percent to 2.5 billion francs, and asset management earnings increased 19 percent to 476 million francs. The investment bank had a loss in the quarter of 15.5 billion francs, compared with a profit of 1.36 billion francs a year ago.
UBS yesterday said it hired Jerker Johansson as head of its investment bank, replacing Huw Jenkins, who left in October after debt writedowns. The 51-year-old vice chairman for Europe at Morgan Stanley will join UBS on March 17 after 22 years at the second-biggest U.S. securities firm.
Johansson ``faces many problems at his new firm, including restoring morale, cutting the problem exposures and convincing staff and clients that the investment bank has a long-term future at UBS,'' Peter Thorne, a London-based analyst at Helvea, said in note yesterday.
Deutsche, Credit Suisse
Rohner, who replaced Peter Wuffli in July, has said he wants the investment bank to cut risks and assets and work more closely with the money-management divisions. He already cut 1,500 jobs at the securities unit and has brushed off calls to sell it.
UBS's main European competitors have so far fared better in the subprime debacle. Frankfurt-based Deutsche Bank AG, which controls Europe's biggest securities unit by revenue, last week reported a smaller-than-expected decline in quarterly profit, managing to avoid any net writedowns on bonds after booking gains from hedges, and recorded a 44 million-euro ($64 million) markdown on leveraged loans.
Credit Suisse Group, Switzerland's second-biggest bank, said on Feb. 12 it took 1.3 billion francs in net writedowns in the fourth quarter. CEO Brady Dougan said the bank is ``well positioned'' in the current markets, which may become ``more constructive'' by the middle of the year.
Problems Remain
UBS Chairman Marcel Ospel, 58, and Rohner, 43, told analysts and investors in London on Dec. 11 that record losses were a result of positions created ``by a small group of people in one team.''
To replenish capital after the first annual loss since the bank was created in a merger a decade ago, UBS is seeking shareholder approval to sell 13 billion francs in bonds that will convert into shares to investors in Singapore and the Middle East.
``The problems that the financial industry faces have not evaporated with the turn of the year,'' Ospel and Rohner said in a letter to shareholders last month. ``2008 is likely to be another generally difficult year.''
UBS was created in 1998 by the merger of Swiss Bank Corp. and Union Bank of Switzerland. Swiss Bank was established in 1854.
Shareholders including the Ethos Foundation are calling for a special audit into the bank's risk controls and a replacement of Ospel, who said in December he isn't thinking of resigning. The Swiss Federal Banking Commission has also initiated an investigation into reasons that led to the bank's subprime holdings and subsequent writedowns, as well as risk management.
Bond insurer woes could become market tsunami: Spitzer
Feb 14, 2008
WASHINGTON (Reuters) - The bond insurer problem must be fixed, or else it could become a "financial tsunami" that wreaks havoc on the broader economy, New York Governor Eliot Spitzer is due to tell the U.S. Congress on Thursday.
A copy of Spitzer's prepared testimony was obtained by Reuters on Wednesday.
New York State Insurance Superintendent Eric Dinallo is working with banks on rescue plans for several bond insurers, which guarantee more than $2.4 trillion of debt and are expected to suffer big losses from insuring bonds linked to subprime mortgages and other risk assets.
Those losses threaten the top credit ratings that insurers need to win new business. If insurers are downgraded by ratings agencies, investors that can only hold top-rated bonds may have to sell billions of dollars of securities, lifting borrowing costs for cities and consumers alike.
About two-thirds of bond insurers' business is guaranteeing municipal debt, and one-third is insuring repackaged consumer debt.
Higher borrowing costs and general credit market difficulties "could be a financial tsunami that causes substantial damage throughout our economy," Spitzer said in the testimony prepared for delivery to a House of Representatives Financial Services subcommittee at 11:30 a.m. (1630 GMT) on Thursday.
Spitzer's comments echoed recent remarks from Deutsche Bank Chief Executive Josef Ackermann, who said that bond insurer downgrades could send shockwaves through financial markets.
Regulators hope to help bond insurers keep their top credit ratings, but are also looking at protecting only the insurers' municipal bond insurance segments, Spitzer said.
"We have been clear from the beginning that municipal investors cannot be allowed to suffer from problems caused by another sector of the market," he said.
Japan Economy Grows 3.7%, Twice as Fast as Expected (Update5)
By Jason Clenfield
Feb. 14 (Bloomberg) -- Japan's economy grew 3.7 percent last quarter, twice the pace economists forecast, as business investment rose and exports to Asia helped companies weather the U.S. slowdown.
Gross domestic product in the three months ended Dec. 31 accelerated from a 1.3 percent expansion in the third quarter, the Cabinet Office said today in Tokyo. The median estimate of 39 economists surveyed by Bloomberg News was for annualized growth of 1.7 percent.
The Nikkei 225 Stock Average surged the most in six years after the report and an unexpected increase in U.S. retail sales allayed concern that the world's two biggest economies may slip into a recession. Bonds fell as investors pared bets that Governor Toshihiko Fukui's successor at the Bank of Japan will have to cut interest rates.
``The person happiest with this data has to be Mr. Fukui,'' said David Cohen, director of Asian forecasting at Action Economics in Singapore. ``This certainly suggests that as long as the whole world doesn't go over the edge, Fukui's model of continued, modest growth is still valid.''
The chance of a rate cut by December fell to 31 percent after the growth report from 47 percent, according to calculations by JPMorgan Chase & Co. Economists predict Fukui will hold the key rate at 0.5 percent tomorrow at the end of his second-to-last policy meeting. Fukui's term expires March 19.
The Nikkei rose 4.3 percent to 13,626.45, its steepest gain since March 2002. The yield on Japan's 10-year bond rose 5 basis points to 1.465 percent.
U.S., European Growth
Japan, the world's second-largest economy, expanded 0.9 percent from the previous quarter. Growth in the U.S., the country's biggest market, slowed to 0.2 percent from 1.2 percent in the same period. The European Union probably grew 0.3 percent in the fourth quarter, less than half the pace of the previous three months, economists expect a report to show today.
Net exports -- or the difference between exports and imports -- contributed 0.4 percentage point to growth. Exports rose 2.9 percent from the previous quarter, as record sales to Asia countered waning demand from the U.S.
Sales at Toyota Motor Corp. and Canon Inc., the country's biggest makers of cars and cameras, rose in the three months to Dec. 31 as demand from emerging markets increased.
``The U.S. still matters but there's a more balanced source of demand than there was 10 years ago,'' Cohen said. ``That's a reason not to be too pessimistic about Japan.''
Corporate Investment
Rising demand from Asia, Russia and the Middle East encouraged companies to increase spending on factories and equipment. Capital investment rose 2.9 percent in the fourth quarter, accounting for about half of growth in the period. Economists had expected a 0.9 percent increase.
``Yes, companies are worried about the U.S., but they're still investing,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. The Bank of Japan's quarterly business survey showed companies planned to increase spending and ``this confirms that people are putting their money where their mouths are.''
Still, other reports suggest companies are bracing for a slowdown. Machinery orders fell for a second month in December. Manufacturers plan to cut production in January and February, the Trade Ministry said last month.
U.S. Slowdown
Economic and Fiscal Policy Minister Hiroko Ota said today that ``downside risks'' for the economy are rising and a slowdown in the U.S. will eventually affect exports.
Omron Corp., a maker of factory sensors and a supplier of parts to Nissan Motor Co., last month cut its sales forecast for the year ending March 31, citing a drop in domestic orders for sensors used to automate assembly lines. Advantest Corp., the world's biggest maker of memory-chip testers, slashed its sales outlook 22 percent after clients reduced orders.
The economy continued to suffer from a construction slump. Housing investment fell 9.1 percent last quarter because of a permit logjam caused by government rules designed to stop building fraud.
Housing starts plunged in the six months since the rules were introduced in June. The latest figures show that the drop in starts is slowing and the industry is making up lost ground.
``A recovery in the construction sector could add half a percentage point to GDP growth in 2008,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``That's enough to counter a smaller contribution from trade. The big unknown is the consumer side.''
Consumer Spending
Private consumption edged up 0.2 percent from the previous quarter, less than economists' expectations of a 0.3 percent gain. Reports show spending may weaken.
Household sentiment slumped to the lowest level in more than four years in January as falling wages and rising prices eroded spending power. Applicants outnumbered job offers for the second straight month in December.
Rising oil prices may have boosted growth in real terms. The GDP deflator, a broad measure of prices used to calculate real growth from nominal, fell 1.3 percent from a year earlier, the biggest drop since the first quarter of 2006. The deflator is adjusted downwards when oil prices rise. In nominal terms the economy grew an annual 1.2 percent in the fourth quarter.
The GDP figures are preliminary and will be revised on March 12.
ONE of corporate Singapore's plummest jobs, chief executive of DBS Group Holdings, has gone to veteran American banker Richard Stanley. His appointment follows a five-month global search to replace Mr Jackson Tai, another American, who stepped down at the end of last year.
Mr Stanley, 47, is currently Citigroup's country officer for China, based in Shanghai. He has submitted his resignation and will move to Singapore to start work at DBS on May 1.
DBS is a leading listed company and the top home-grown financial institution. The CEO job usually has a multi-million dollar pay packet, though Mr Stanley's remuneration has yet to be disclosed.
Mr Stanley has lived here twice before while working for Citigroup. He was here for about six years in the 1990s. He married Singaporean Koh Li Peng, who had won the Miss Singapore crown in 1984 and later also won the Mrs Singapore title. They have three children - a son doing national service, a teenage daughter and a young son.
DBS said in a statement yesterday that Mr Stanley was picked as 'the most suitable candidate to lead DBS to the next level'.
He has worked at Citi for 27 years, mainly in investment and corporate banking roles. He was chosen from candidates who have been said to include Mr Francis Rozario, head of Temasek Holdings' financial investment firm, and Mr Mike DeNoma, Standard Chartered Bank's executive director for consumer banking.
The news was welcomed by DBS staff. One said he was 'glad that the period of waiting and uncertainty is finally over'. Another wondered about 'rotations or changes in senior management'.
Indeed, Mr Frank Wong, DBS chief operating officer and vice-chairman, will step down at the end of the year.
A DBS spokesman told The Straits Times: 'Frank expressed his desire to retire in 2006, but kindly agreed to defer his retirement plans time and again.' He would stay at DBS until later this year to ensure a smooth transition.
Analysts such as Mr Mathew Wilson of Morgan Stanley lauded the move.
He said in a note to clients that Mr Stanley is 'a leader who should be well-acquainted with the workings, opportunities and risks in the region'.
DBS chairman Koh Boon Hwee said: 'As a seasoned banker with a proven track record in Asia, Richard is well-positioned to help DBS grow our regional footprint, diversify our revenue base and focus on higher-return businesses.'
Former colleagues at Citi described him as a friendly 'people person' with 'strong skills in fostering a good culture in an organisation'.
Now, two of the three local banks will be helmed by former Citibankers. Mr David Conner, OCBC Bank chief executive, was Mr Stanley's boss more than a decade ago.
Mr Stanley had moved to Singapore in 1990 and served as Citi's head of financial institutions and securities services division. In 2004, he returned as country officer in Singapore, where he oversaw Citi's corporate banking, corporate finance, investment banking and other activities.
Older fathers have healthier offspring, say Canadian study
13 February 2008
For a young woman in search of a suitable partner, an older man could be a better bet for producing healthy offspring than a hormone-fuelled teenager, researchers have found.
The largest study investigating the influence of paternal age on the chances of having a baby with birth problems has found that fathers under the age of 20 are at highest risk.
Babies born to teenage fathers were 22 per cent more likely to die in the first four weeks and 41 per cent more likely to die in the first year than those born to fathers in their 20s. They were also up to 17 per cent more likely to be born early and have a low birth weight.
There was no increased risk for babies born to older fathers, aged 40-plus. All the mothers in the study, published in the medical journal Human Reproduction, were aged 20 to 29, to eliminate the influence of maternal age.
Professor Shi Wu Wen, of the Ottawa Health Research Institute, Canada, who led the study, said the findings had potentially serious implications.
"Although the increased relative risks for most outcomes were small the magnitude of the risk to society could be huge, if the increases we found are truly attributable to paternal age."
However, it was also likely that social factors played a part.
Teenage fathers were more likely to be poorer than older fathers in their 40s, less well educated and less likely to bring their partners for antenatal care when potential birth problems could be anticipated.
Allan Pacey, senior lecturer in andrology at the University of Sheffield, said: "It would be easy to point the finger at younger father's sperm and say that they were inadequate in some way.
"But that bucks the trend of many studies that have shown there are increasing sperm DNA defects as men get older.
"A far more convincing explanation for the finding in this study is that older men are simply better able to provide for their pregnant partners than younger fathers. It makes sense that babies born to older fathers probably have a better start to life.
PETALING JAYA: Crude palm oil (CPO) prices extended losses to a second day, brought down by weak latest monthly crop data from the Malaysian Palm Oil Board (MPOB) yesterday.
But market sentiment remained firm on buoyant competing edible oil prices overseas, traders said.
The third month CPO futures contract on Bursa Derivatives, which is the global benchmark for palm oil, eased a further RM15 to RM3,360 per tonne yesterday.
The contract hit a record RM3,458 per tonne in intra-day trade last week.
MPOB's most recent monthly statistics showed palm oil stockpiles in January had surged 11.5% to a new high of 1.875 million tonnes from 1.68 million tonnes in December.
The jump was attributed to a 2% increase in production to 1.42 million tonnes during the month, while exports fell 24% to 1.04 million tonnes.
Global fears that supply of vegetable oil would continue to lag rising demand from very large economies like China and India had lifted CPO price by 77% over the past one year and soybean oil by 73% during the same period.
Palm oil remained the cheaper vegetable oil compared with close rival soybean oil on a pound for pound basis.
In Chicago, soybean oil futures remained less than 1% lower from a record 55.76 US cents per pound set earlier this month. According to Bloomberg data, palm oil is about 8.5 US cents per pound cheaper than soybean oil.
Analysts said the adverse weather that had affected soybean production in the Argentina, China and India would continue to support palm oil prices.
They said a shortage in soybean supply would benefit palm oil, as both are widely used in cooking, as well as to make cosmetics and can be blended with fossil fuel to make biodiesel. Soybean oil is derived by crushing soybean.
MPOB last month said palm oil production in Malaysia would hit 16.2 million tonnes this year, up from 15.8 million in 2007. The forecast increase was based on improving yield outlook and expansion in planted area.
“However, the outlook for palm oil continues to remain positive in view of the global oils and fats (supply) tightness and the volatility of crude oil prices,'' the agency said.
Singapore Airlines is expected to ramp up its bid to grab a bigger share of the world's fastest growing aviation market in China by sweetening the terms of a failed offer for China Eastern or by targeting another carrier.
SIA is Asia's most profitable airline but its lack of success in seizing new routes is exposing it to growing competition in the region, where carriers from India to China are expanding.
The lack of a clear growth strategy as SIA awaits a China deal, coupled with a slowdown in global travel, has led analysts to cut profit forecasts for the carrier.
SIA, 55% owned by state investment firm Temasek Holdings, lost a bid last month for a stake in China Eastern after it was effectively blocked by the mainland carrier's bigger rival Air China.
But most analysts expect it to make a second bid or turn to smaller regional carriers which could be less sensitive targets.
"China will be a major driver in business and premium traffic, so it's crucial for SIA to get into that market," said CIMB-GK analyst Raymond Yap.
SIA and Temasek's $US920 million bid for 24% of China Eastern initially received the blessings of the Chinese government, but was voted down in January after objections from some China Eastern shareholders and a counter-offer by Air China.
Analysts had expected the China Eastern stake to boost SIA's earnings by 5% in the first year, but the greater benefit would be more access to China's rapidly growing domestic market.
SIA, which now serves five Chinese cities including Beijing, Shanghai and Hong Kong, could gain access to China Eastern's 105 international and 308 domestic routes through future joint operations beyond China Eastern's hub in Shanghai.
While global travel demand is expected to be dampened by a U.S. recession, China is forecast to be Asia's fastest-growing aviation market, with double-digit growth up to 2011.
"What they do next depends very much on the vibe they get from the Chinese, especially after the difficulty with China Eastern," said Standard & Poor's analyst Shukor Yusof.
SIA said it remains interested in China Eastern, but said the next step is up to the mainland carrier.
"China is a very important market for Singapore Airlines," spokesman Stephen Forshaw said, while reiterating the position that "the price offered is the maximum justified by the business fundamentals".
Merrill Lynch analyst Paul Dewberry thinks SIA could offer sweeteners to China Eastern's shareholders such as a special dividend.
Others said SIA should look at smaller regional carriers.
"Shanghai Airlines is a viable alternative which would be much easier to integrate," said Cazenove analyst Andrew Au.
Citigroup analyst Corrine Png, who recommends investors sell the stock, cited SIA's lower growth prospects compared to rivals such as Hong Kong-based Cathay Pacific and Air China.
"M&A opportunities are relatively limited given regulatory constraints and the lack of attractive investment targets."
But Singapore Airlines could look to other avenues for growth if its China plans stall, through its partly-owned low-cost carrier Tiger Airways or by bidding for Toll Holdings' 62% stake in Virgin Blue, Australia's No. 2 carrier.
Virgin Blue is seen as the main beneficiary of an open skies deal being negotiated between the United States and Australia, which could open the prized U.S.-Australia route to competition.
SIA could also open new passenger and cargo routes in Europe and North America, thanks to a slew of open skies pacts signed by the Singapore government.
"Each of these deals could open up new network opportunities, so Singapore Airlines still has growth prospects," said Yusof.
A UK pact will take effect from end March, but SIA said it is not likely to add new services in the short term.
The problem is getting the rights to land or depart at an airport - a difficult task especially at London's highly congested Heathrow airport.
Allco Finance Group Ltd has deferred its first half results announcement to Monday, February 18.
The company was expected to announce its result on Friday.
"The shares will remain in voluntary suspension," it said.
Shares in Transport infrastructure specialist Allco fell as $1.70 on January 21.
API, a private investor and Allco's largest shareholder, was forced by two of its margin lenders to dump 46 per cent of its holding in the group.
The margin calls were triggered by a run on Allco's shares, fuelled by growing investor concern about the level of debt used in its investment strategy.
The shares have since recovered to $3.05, when they last traded on February 11.
SINGAPORE - Singapore's economy shrank by an annualised, seasonally adjusted rate of 4.8 per cent in the fourth quarter, worse-than-expected and the first quarterly contraction since 2003 as weak manufacturing dragged on growth, data showed on Thursday.
The figure was below an advance official estimate of a 3.2 per cent contraction. The estimate, issued in January, was based largely on data from October and November.
The Government also cut the forecasts for this year's economic growth. It said the economy will grow between 4-6 per cent, from a previous forecast of 4.5 to 6.5 per cent.
From a year earlier, Singapore's economy expanded by 5.4 per cent in the three months to the end of December, compared with an advance estimate of 6.0 per cent, and bringing growth for 2007 to 7.7 per cent.
Manufacturing expanded just 0.2 per cent in the fourth quarter from a year earlier, while construction grew 24.3 per cent. The financial services sector grew 15.9 per cent.
Inflation forecast raised
Singapore raised its inflation forecast for 2008 to 4.5 to 6.5 per cent on Wednesday, from a previous forecast of 3.5-4.5 per cent.
'Inflation should get worse before it gets better,' said Ravi Menon, second permanent secretary of the Trade Ministry, adding it was expected to peak in the first half of the year and moderate in the second half.
The central bank ruled out tightening monetary policy. 'Current conditions suggest that the US will likely enter a mild recession in the first half,' the Ministry of Trade and Industry said in a statement. 'The key uncertainty is over the length and severity of this slowdown.'
However, Singapore does not itself expect to sink into recession, defined as two consecutive quarterly declines in GDP, as it thinks Asian economies will remain relatively robust.
'Most of the simulations we have done do not show that outcome,' said Mr Menon.
Sing dollar slips
The Singapore dollar hit a one-week low on Thursday after data showed a steep contraction in the economy, while the Chinese yuan rebounded after falling sharply in post-holiday trade the previous day.
The Singapore dollar fell as far as 1.4215 per US dollar, down a third of a per cent from late Asian trade on Wednesday, as data showed the economy shrank by an annualised, seasonally adjusted 4.8 per cent in the fourth quarter.-- REUTERS
Money Market Rates Tumble; Central Banks Inject Funds (Update8)
By Gavin Finch
Dec. 18 (Bloomberg) -- The cost to borrow in euros plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease credit-market gridlock through year-end.
The two-week euro interbank offered rate dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had climbed 83 basis points in the past two weeks as banks anticipated a squeeze on credit through the end of the year.
``These are strong-arm tactics intended to show the market they're seriously committed to breaking the deadlock,'' said Marc Ostwald, a fixed-income strategist at Insinger De Beaufort SA in London. ``The ECB is helping to bankroll banks out of a problem that they themselves created.''
The decline may signal that policy makers, in their first coordinated action since Sept. 11, 2001, are making headway in reviving lending between banks. The credit-market crisis has caused banks from UBS AG to Deutsche Bank AG to report writedowns on securities linked to U.S. subprime mortgages, and sent money-market rates soaring.
The Bank of England also held the first of two special operations today, offering three-month loans in pounds. Yesterday, the Federal Reserve auctioned one-month cash in dollars, the first of four such operations.
The central bank measures have had mixed results. The one- month dollar rate fell 2 basis points to 4.95 percent, 70 basis points more than the Fed's key rate, according to the British Bankers' Association. The cost of three-month loans in pounds declined 4 basis points to 6.39 percent, 89 basis points more than the Bank of England benchmark, the BBA said.
`Fundamental Issues'
The ECB action ``doesn't address the fundamental issues of banks hoarding cash and while the central bank has succeeded in stabilizing the shorter-term rates, it makes little impact on the longer-term rates,'' said Lena Komileva, an economist at Tullett Prebon in London.
The cost of borrowing euros for two weeks is still 45 basis points higher than the ECB's benchmark financing rate. It was 9 basis points higher at the end of June.
The ECB loaned 348.6 billion euros ($501.5 billion) for two weeks at 4.21 percent today, almost 170 billion euros more than it estimated was needed. It was the Frankfurt-based bank's biggest open-market operation.
TED Spread Narrows
The TED spread, or difference between what the U.S. government and banks pay for three-month loans, narrowed for a fifth day to 189 basis points, indicating an increased willingness among banks to lend. The spread was 35 basis points at the start of the year.
Bids were received from 390 banks, ranging from 4 percent to 4.45 percent, the ECB said today. The central bank first offered extra cash on Aug. 9, when it lent 95 billion euros of emergency funds. Banks also borrowed about 2.4 billion euros at 5 percent yesterday, the most since Sept. 26, the ECB said.
The three-month euro-borrowing rate fell 7 basis points to 4.88 percent, down from near a seven-year high, the EBF said.
``Maybe this is the sign we've all been waiting for that a peak in Libor has been reached,'' said Patrick Jacq, a fixed- income strategist at BNP Paribas SA in Paris. ``It's a definite sign of an improvement in the market.''
The cost of borrowing in dollars for two weeks increased 1 basis point to 5.10 percent, the BBA said today. The Fed yesterday offered $20 billion in one-month loans. The results will be announced tomorrow.
BOE Operation
The corresponding rate for pounds soared a record 77 basis points to 6.51 percent, the BBA said. Today is the first day that pound-denominated loans cover a borrower's commitments through the end of the year.
The Bank of England offered 10 billion pounds ($20 billion) of three-month cash. It received 10.9 billion pounds of orders for the loans, lending at an average of 5.949 percent. The central bank's benchmark interest rate is 5.5 percent.
Central banks in the U.S., U.K., Canada, Switzerland and the euro region are responding to subprime mortgage-related losses at financial institutions including Citigroup Inc., Merrill Lynch & Co. and Bank of America Corp.
Goldman Sachs Group Inc. estimated last month losses related to record home foreclosures in the U.S. may be as high as $400 billion for financial companies. If accurate, banks, brokerages and hedge funds would need to cut lending by $2 trillion, triggering a ``substantial recession,'' the firm said.
U.S. corporate defaults probably will quadruple next year after the number of companies that lost their investment-grade credit ratings rose at the fastest pace since 2003, according to Moody's Investors Service.
WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke said Thursday the central bank was ready to cut interest rates further if fresh signs of a weaker-than-expected U.S. economy emerge.
The Federal Open Market Committee, which sets Fed monetary policy, "will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke told the Senate Banking Committee in prepared testimony.
The Fed has done a lot to stave off a recession but stands ready to do more if the outlook darkens, he said.
Financial markets showed little reaction to Bernanke's testimony, most likely because it was not surprising, analysts said.
"Given that markets are already discounting a very weak economic environment ... the Fed chairman's remarks were pretty much greeted with a yawn," said Josh Shapiro, chief U.S. economist at MFR Inc.
Fed economists will be burning the midnight oil to gauge if the rate cuts undertaken so far are having their intended effects, Bernanke said.
In his brief written remarks, Bernanke painted an "improving picture" for the economy, saying he expects a stronger pace of expansion starting later this year after an unspecified "period of sluggish growth."
Inflation should moderate from its current rate, and the public's expectation of inflation should remain "reasonably well anchored," he said.
At the same time, the credit squeeze should continue to dampen growth, and there is no end in sight to the downturn in the housing sector, he said.
But the Fed chairman was clear about the downside risks.
"Although the baseline outlook envisions an improving picture, it is important to recognize the downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," Bernanke said.
No respite for housing's woes
Bernanke also said there was no sign of an end to the downturn in the housing market. He said the credit squeeze would also dampen growth in coming months.
Bernanke didn't address the lessons of the financial markets' meltdown. In general, federal regulators have been mum on this score, perhaps in the belief that there is enough blame to go around for everyone from the executive branch to the legislative branch and independent agencies.
Also Thursday, Treasury Secretary Henry Paulson told legislators that he's focused on ways to reduce the effect of the credit squeeze on the economy through efforts to work to minimize foreclosures. Paulson said Wednesday that the President's Working Group on Financial Markets is still considering regulatory reform issues behind closed doors.
And Securities and Exchange Commission chief Christopher Cox told legislators that said his agency is mulling new rules for credit-rating agencies in response to problems experienced with the ratings of complex securities based on subprime residential mortgages.
UBS Won't Support Failing Auction-Rate Securities (Update4)
By Martin Z. Braun and William Selway
Feb. 14 (Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation.
The second-biggest underwriter of the securities, whose rates are reset periodically at auctions, notified its 8,200 U.S. brokers of the decision yesterday, said the person, who declined to be identified because the announcement wasn't publicly disclosed. Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Citigroup Inc. allowed auctions to fail as mounting losses from the collapse of subprime mortgages causes capital markets to seize up.
As much as $20 billion of auctions didn't attract enough buyers yesterday, an 80 percent failure rate, based on estimates from Bank of America Corp. and JPMorgan Chase & Co.
``We are kind of in uncharted territory right now,'' said Anne Kritzmire, a managing director for closed-end funds at Nuveen Investments in Chicago.
Auctions are failing as confidence in the creditworthiness of insurers backing the securities wanes, and as loss-plagued banks seek to avoid tying up their capital. More than 129 auctions failed yesterday, Kritzmire said.
Rohini Pragasam, a spokeswoman for UBS, the second-biggest underwriter of municipal auction-rate debt after Citigroup in 2006 according to Thomson Financial, declined to comment. UBS, the dealer on the hospital corporation's auction, today posted the biggest-ever loss by a bank for the fourth quarter. The stock declined $3.05, or 8.25 percent, to $33.94 at 11:47 a.m. in New York.
Auction-Rate Resets
Auction bonds have interest rates determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.
Investors have little opportunity to judge the risk that auctions will fail because of little public disclosure about interest rates set at the periodic bidding or other details such as how many bids were submitted or how many bonds were offered for sale.
The Municipal Securities Rulemaking board is working on changes to its trade reporting system that would reveal at least the interest rate on auction bonds when they are traded. Currently, only the price is disclosed.
Greater `Transparency' Sought
``I think you need to have more transparency in terms of the market so that investors can judge liquidity risks and so that people, both retail investors and corporate investors, can decide where they want to put their money,'' Joseph Fichera, chief executive officer of Saber Partners, a New York based financial adviser to local governments, said in an interview on Bloomberg Television.
Until recently, UBS and other banks that collect fees for running auctions have stepped in with their capital to prevent failures when bidding faltered. These firms have grown unwilling to commit their money to auction-rate securities after suffering at least $133 billion in credit losses and mortgage writedowns stemming from the subprime mortgage collapse.
Unwilling to Bid
``If you talk to the dealers, their balance sheets are getting flooded with these auction-rate certificates right now,'' said Doug Dachille, who oversees $7 billion in fixed- income securities as chief executive officer of First Principles Capital Management LLC in New York. ``Right now, the way they're dealing with the issue is they won't bid. That's why we're seeing failed auctions.''
Auctions began stumbling three weeks ago when banks couldn't drum up enough demand for auction rate bonds sold by borrowers, including Georgetown University and Nevada Power. Since then, auctions have failed for frequent and well-known borrowers, such as Port Authority of New York and New Jersey and New York state's Metropolitan Transportation Authority.
``We're hearing it's a general reaction to the auction market,'' said Marlene Zurack, senior vice president for New York City's Health and Hospitals Corp., whose auction yesterday of $64.9 million of bonds failed. ``The truth is our credit is good, our ratings are good, our bond insurer is unscathed, and it still happened.''
Massachusetts has sold $565 million in auction-rate securities, including two series of bonds sold in 2000, according to state treasury spokeswoman Alison Mitchell. An auction to reset rates on one of those series failed yesterday, and the rate reset to 4.473 percent from 3 percent, she said.
Insurance at Issue
Eighty percent of the $15 billion to $25 billion of auction-rate bonds scheduled for bidding daily didn't attract sufficient bids yesterday, according to Alex Roever, a JPMorgan Chase & Co. fixed income analyst.
The failures show the widening impact of the bursting of the U.S. housing bubble, which has caused rising defaults on home loans and threatened the credit ratings of the insurance companies that guaranteed structured securities -- such as collateralized debt obligations tied to mortgages -- against default.
The waning strength of some bond insurers has caused investors to trim holdings of debt backed by companies such as Ambac Financial Group Inc.'s Ambac Assurance Corp., concerned that it may be difficult to sell such debt should insurers' problems worsen. That has hurt borrowers such as the Port Authority, whose auction debt soared to 20 percent on Feb. 12 from 4.3 percent a week ago even though there is little risk of default.
Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.
NEW YORK/WASHINGTON (Reuters) - New York insurance regulator Eric Dinallo, who is heading up efforts to rescue bond insurers, is set to testify that he will consider allowing the companies to split their relatively strong municipal bond guarantee businesses off from the problem parts of their businesses.
According to prepared testimony obtained by Reuters, New York Insurance Superintendent Dinallo prefers to protect all parts of the bond insurers' business, but if it becomes clear that is not possible, his first priority is to protect municipal bond issuers and investors.
Reuters first reported on Tuesday that insurers could be split.
Dinallo is also looking at increasing regulation for the bond insurers, including potentially looking carefully at all of an insurers' positions, the way a rating agency would.
Dinallo is set to speak later on Thursday before the House Subcommittee on Capital Markets.
U.S. bond insurers, which guarantee more than $2.4 trillion of securities, are expected to make billions of dollars of payouts after guaranteeing repackaged subprime mortgages and other risky debt.
Those payouts may trigger ratings downgrades, force investors to sell billions of dollars of bonds, and lift borrowing costs for city governments and consumers.
The bond insurer problem must be fixed, or else it could become a "financial tsunami" that wreaks havoc on the broader economy, according to separate prepared testimony from New York Governor Eliot Spitzer obtained by Reuters.
MBIA Inc., the largest bond insurer in the world, is set to testify on Thursday that short-sellers are partly to blame for the decline in confidence in bond insurers, and plans to suggest regulators and lawmakers curtail the efforts of short-sellers, who profit when a company's shares decline.
Regulators are working with banks, private equity firms, and others to bolster the capital levels of bond insurers and prevent downgrades. But the discussions are difficult, according to Dinallo's testimony.
A group of banks is working with bond insurer Ambac Financial Group Inc on a possible rescue, while another group is working on a potential bailout of FGIC Corp.
Billionaire Wilbur Ross is considering investing money in a bond insurer, and Warren Buffett said earlier this week on television network CNBC that he has offered to reinsure three bond insurers' municipal bond exposure.
If strengthening a bond insurer is not possible, regulators will consider allowing the healthy municipal insurance businesses to split themselves away from the portion of the business that guaranteed repackaged subprime mortgage bonds and other troubled bonds, Dinallo's testimony says.
Municipal bond guarantees account for about two-thirds of bond insurers' businesses.
Bond insurers have days to re-capitalize, Spitzer says
By Alistair Barr Last update: 12:32 p.m. EST Feb. 14, 2008
SAN FRANCISCO (MarketWatch) -- Bond insurers have four to five business days to re-capitalize themselves enough to keep their crucial AAA credit ratings, New York Governor Eliot Spitzer said during a Congressional hearing on the $2.4 trillion industry on Thursday. If that doesn't happen, regulators will have to step in and separate bond insurers' municipal businesses from their more troubled structured finance units. "We will need to move in that direction. It is not our first choice but time is short," Spitzer said. "In the next for or five bus days we would like to see a resolution," Spitzer added. "It's time for deals to get done."
18 comments:
Six lies we tell ourselves about why we spend
Marshall Loeb
Feb. 13, 2008
NEW YORK (MarketWatch) -- Self-deception and a lack of control are the chief reasons for many poor spending decisions, and whiny explanations about wasteful purchases are nothing more than excuses for bad spending behaviour.
If you are an impulse shopper who simply can’t stop throwing money around, recognizing some of the common lies people tell themselves to justify their spending could help you rein in your urges, says syndicated personal finance columnist Gregory Karp. In his new book “Living Rich by Spending Smart,” he lists six clichés that freewheeling spenders treat as mantras:
1. I could die tomorrow, so I’ll live for today. This immature attitude justifies actions of the buy-it-now and pay-for-it-whenever class. It’s the primary excuse for not saving money.
2. I work hard, I deserve it. This is akin to a four-year-old throwing a tantrum in a toy store crying “Gimme, gimme.” While it is true that many Americans are overworked and that you have to treat yourself occasionally, self-gifting is more prominent today because of advertising pitches to buy things “because you deserve them.” You also deserve to live out a retirement that doesn’t include regular helpings of Alpo.
3. I don’t have a head for numbers. This is the excuse given for not paying attention to personal finances. But managing money doesn’t require complicated mathematics. Consumers now have a plethora of free online tools to help with all sorts of financial planning. Be happy to do smart things with your money, if they aren’t the absolute best you can do. Often, the absolute best involves more risk than you should be taking.
4. I’m too busy to compare prices or manage money. This might be true for a small fraction of people, says Karp, but mostly it’s a lie. Shutting off the TV one night a week will provide most people plenty of time to manage their finances. For those truly time-strapped, consider hiring a good financial adviser. It’s more costly than managing your finances yourself, but better than doing nothing.
5. It’s an investment. Most consumer purchases aren’t investments, because almost all of them plummet in value the moment you leave the store. So you don’t “invest” in a car, a plasma TV or a new pair of shoes unless somehow they’ll make you money. They are expenses. Pacifying your self-guilt by calling them an investment is self-delusion.
6. I don’t earn enough to save money. Saving is not about what you earn, it’s about what you keep. If your paycheck truly covers only the cost of bare necessities, you have an income problem. It’s time to work more hours or earn more with the hours you work.
Airbus in talks to create A380 casino
By Raphael Minder in Hong Kong
February 13 2008
High-rolling gamblers may soon be cashing in their chips with the great casino in the sky.
Airbus has been approached by potential Asian buyers who are looking to turn its A380 “superjumbo” aircraft into a flying casino, says the European aircraft-maker.
François Chazelle, who heads the Airbus executive and private aviation division, said: “Discussions are under way, and not just with casino operators.” Should the talks lead to an order soon, a fully-fitted casino A380 could be delivered between 2012 and 2017, he said.
“This [gambling] is clearly a growing business in Asia and what this interest reflects is what is happening in Macao and Singapore,” he said. “The idea of a flying casino has been mentioned before but it’s now looking a lot more concrete.”
Macao has overtaken Las Vegas as the world’s biggest gaming centre, while Singapore is planning to open its first casino next year.
However, there are strict curbs, or outright casino bans, on gambling in much of Asia, including Thailand and mainland China. Nevertheless, operators have long offered gambling-boat cruises out of cities such as Hong Kong into international waters.
Mr Chazelle said the legal loophole aspect was “certainly a factor but I think it is more about the attraction of being able to offer such an extraordinary activity”. He said the A380 was the first aircraft large enough for a full-fledged casino operation. “If this could have worked before, I’m sure it would have,” he said.
The Airbus talks also follow recent reports that US gaming operator Sands is planning an air link between its Venetian casinos in Las Vegas and Macao that will allow passengers to play baccarat on two private jets. Mr Chazelle would not name possible casino clients for the A380 and whether Sands was among them.
Contacted on Wednesday, Macao-based gaming executives said they were not aware that any of the territory’s six licensed operators had entered discussions to purchase a flying casino. “It would give ‘fiscal flight’ a whole new meaning,” said one sceptical casino executive, who noted potential government concerns that aerial gaming would be unregulated and untaxed.
Daniel Lehnberg, business development manager for the Asia Pacific Poker Tour, which last year arranged Macao’s first Texas Hold’em tournament, said governments would most probably want to enforce new laws if flying casinos were to develop.
Asian Stocks Advance as Economic Concerns Ease; Toyota Climbs
By Chen Shiyin and Ian C. Sayson
Feb. 14 (Bloomberg) -- Asian stocks rose, sending the region's benchmark to its biggest advance in three weeks. Banks and technology companies gained as Japan's economic growth accelerated and U.S. retail sales unexpectedly gained.
Mizuho Financial Group Inc. climbed for the first time in seven days after Japanese gross domestic product expanded at the quickest pace in three quarters. Samsung Electronics Co. and Toyota Motor Corp. led companies that rely on U.S. revenue higher. Rio Tinto Group jumped after reporting higher profit.
``The development in Japan is one of the positive snippets of news that helped turn market sentiment,'' said Don Williams, who helps manage $1.3 billion at Platypus Asset Management in Sydney. ``The U.S. is a very important economy for most markets in the region and the retail report coming out there provides a bigger source of optimism.''
The MSCI Asia Pacific Index added 3.7 percent to 143.89 at 3:23 p.m. in Tokyo, as all 10 industry groups gained. Concerns that worldwide economic expansion will slow amid mounting losses related to U.S. subprime-mortgage investments have dragged the benchmark down by 8.8 percent this year.
Japan's Nikkei 225 Stock Average jumped 4.3 percent, the biggest climb since March 2002. Benchmarks rose elsewhere in the region except in the Philippines. Incitec Pivot Ltd., Australia's largest fertilizer maker, and STX Pan Ocean Co., South Korea's biggest commodity-shipping line, led gains among shares that will be added to MSCI Inc.'s global indexes.
Japan's Growth
U.S. stocks rose yesterday for a third day, the longest stretch of gains this year, as increased demand at Applied Materials Inc., the No. 1 maker of semiconductor-production machines, spurred a rally in technology shares.
Mizuho, Japan's third-largest publicly traded bank by market value, added 4.2 percent to 443,000 yen, halting a six- day, 14 percent drop. Sumitomo Mitsui Financial Group Inc., the second-biggest, rose 3 percent to 785,000 yen.
Japan's economic growth accelerated to 3.7 percent last quarter from a revised 1.3 percent annualized expansion in the third quarter, the Cabinet Office said today. The median estimate of 39 economists surveyed by Bloomberg News was for growth of 1.7 percent.
Positive Evidence
Meanwhile, U.S. retail sales climbed 0.3 percent in January on increased spending on autos, clothes and gasoline. Economists in a Bloomberg survey had expected a drop of 0.3 percent.
``The Japanese number was surprisingly strong, while better-than-expected U.S. retail sales could help prevent'' the economy from contracting, said Shane Oliver, who helps manage the equivalent of $113 billion at AMP Capital Investors in Sydney. ``We're not likely to see a protracted bear market.''
Other signs Asia is weathering a U.S. slowdown have emerged this week. Australia's statistics bureau said today the nation's unemployment rate fell to the lowest since 1974. Consumer confidence in South Korea rose to the highest in more than five years, the government said on Feb. 12.
Samsung, the world's biggest computer-memory maker, climbed 3.3 percent to 593,000 won. Hon Hai Precision Industry Co., a maker of Apple Inc.'s iPods, climbed 6.7 percent to NT$174.50. Li & Fung Ltd., a Hong Kong-based supplier to Wal-Mart Stores Inc., advanced 4.9 percent to HK$29.05.
MSCI Additions
Toyota, Japan's largest automaker, rose 2.2 percent to 6,000 yen. The company got 37 percent of its sales in its last business year from North America. Nissan Motor Co., the third- biggest, jumped 4.7 percent to 966 yen.
Rio Tinto, the world's third-biggest mining company, climbed 4 percent to A$133.77, its highest close since Jan. 2. Rio said second-half profit rose 11 percent to $4.06 billion on record iron-ore production and its acquisition of Alcan Inc.
Tokyo Electron Ltd., the world's second-largest maker of semiconductor equipment, jumped 6.2 percent to 6,900 yen. The Nikkei newspaper said the company may post higher-than-forecast earnings. Nippon Sheet Glass Co. surged 12 percent to 501 yen, the fourth-biggest advance on the MSCI World Index, after reporting an 18 percent increase in third-quarter net income.
In Australia, Incitec Pivot gained 4.9 percent to A$138.70 after MSCI said the company was among eight Asian stocks chosen to join its benchmarks this month.
STX Pan Ocean jumped 15 percent to 2,050 won. Sydney-based Sims Group Ltd., the world's biggest recycler of scrap metal, rose 1.8 percent to A$31.55. It was also added to MSCI indexes.
Centro Retail Group, among three stocks deleted from the index compiler's benchmarks, slumped 9.8 percent to 37 Australian cents, taking its slide in the past six months to 79 percent. The company is a unit of Centro Properties Group, an owner of more than 700 U.S. malls that put itself up for sale.
Toda Corp. plunged 12 percent to 420 yen, the biggest decline in at least 10 years and the largest decline on the MSCI World Index. The Japanese general contractor cut its full-year profit forecast by 28 percent.
UBS Posts Record Loss After $13.7 Billion Writedowns (Update2)
By Elena Logutenkova
Feb. 14 (Bloomberg) -- UBS AG posted the biggest ever loss by a bank in the fourth quarter after $13.7 billion in writedowns on securities infected by U.S. subprime mortgages.
Europe's largest bank by assets had a net loss of 12.5 billion Swiss francs ($11.3 billion), compared with a profit of 3.4 billion francs a year ago, the Zurich-based company said today. UBS reported on Jan. 30 a preliminary loss of about 12.5 billion francs for the period, after increasing writedowns.
Chief Executive Officer Marcel Rohner, on a conference call with journalists, described the results as ``unacceptable'' and declined to predict whether the bank will return to profit in the first quarter. Rising U.S. subprime-mortgage defaults led to more than $145 billion in writedowns and loan losses at the world's biggest financial companies. The Group of Seven nations estimates the markdowns may swell to $400 billion, German Finance Minister Peer Steinbrueck said on Feb. 9.
``The rot is spreading to other residential areas,'' ABN Amro Holding NV analysts Kinner Lakhani and Omar Fall said in a note to clients last week. They recommend investors ``avoid'' UBS shares and forecast as much as $10.8 billion of possible further writedowns at the bank.
UBS slumped 36 percent in Zurich trading in the past six months, making it the sixth-worst performer in the 60-member Bloomberg Europe Banks and Financial Services Index, which lost 23 percent.
New Investment Bank Head
UBS's writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime and prime, and $871 million on credit protection purchased from monoline insurers. The bank recorded losses of about $500 million on commercial real estate and about $200 million on loans for leveraged buyouts.
UBS reiterated today that 2008 will be ``another difficult year.''
The wealth management and business banking division raised fourth-quarter profit 12 percent to 2.5 billion francs, and asset management earnings increased 19 percent to 476 million francs. The investment bank had a loss in the quarter of 15.5 billion francs, compared with a profit of 1.36 billion francs a year ago.
UBS yesterday said it hired Jerker Johansson as head of its investment bank, replacing Huw Jenkins, who left in October after debt writedowns. The 51-year-old vice chairman for Europe at Morgan Stanley will join UBS on March 17 after 22 years at the second-biggest U.S. securities firm.
Johansson ``faces many problems at his new firm, including restoring morale, cutting the problem exposures and convincing staff and clients that the investment bank has a long-term future at UBS,'' Peter Thorne, a London-based analyst at Helvea, said in note yesterday.
Deutsche, Credit Suisse
Rohner, who replaced Peter Wuffli in July, has said he wants the investment bank to cut risks and assets and work more closely with the money-management divisions. He already cut 1,500 jobs at the securities unit and has brushed off calls to sell it.
UBS's main European competitors have so far fared better in the subprime debacle. Frankfurt-based Deutsche Bank AG, which controls Europe's biggest securities unit by revenue, last week reported a smaller-than-expected decline in quarterly profit, managing to avoid any net writedowns on bonds after booking gains from hedges, and recorded a 44 million-euro ($64 million) markdown on leveraged loans.
Credit Suisse Group, Switzerland's second-biggest bank, said on Feb. 12 it took 1.3 billion francs in net writedowns in the fourth quarter. CEO Brady Dougan said the bank is ``well positioned'' in the current markets, which may become ``more constructive'' by the middle of the year.
Problems Remain
UBS Chairman Marcel Ospel, 58, and Rohner, 43, told analysts and investors in London on Dec. 11 that record losses were a result of positions created ``by a small group of people in one team.''
To replenish capital after the first annual loss since the bank was created in a merger a decade ago, UBS is seeking shareholder approval to sell 13 billion francs in bonds that will convert into shares to investors in Singapore and the Middle East.
``The problems that the financial industry faces have not evaporated with the turn of the year,'' Ospel and Rohner said in a letter to shareholders last month. ``2008 is likely to be another generally difficult year.''
UBS was created in 1998 by the merger of Swiss Bank Corp. and Union Bank of Switzerland. Swiss Bank was established in 1854.
Shareholders including the Ethos Foundation are calling for a special audit into the bank's risk controls and a replacement of Ospel, who said in December he isn't thinking of resigning. The Swiss Federal Banking Commission has also initiated an investigation into reasons that led to the bank's subprime holdings and subsequent writedowns, as well as risk management.
Bond insurer woes could become market tsunami: Spitzer
Feb 14, 2008
WASHINGTON (Reuters) - The bond insurer problem must be fixed, or else it could become a "financial tsunami" that wreaks havoc on the broader economy, New York Governor Eliot Spitzer is due to tell the U.S. Congress on Thursday.
A copy of Spitzer's prepared testimony was obtained by Reuters on Wednesday.
New York State Insurance Superintendent Eric Dinallo is working with banks on rescue plans for several bond insurers, which guarantee more than $2.4 trillion of debt and are expected to suffer big losses from insuring bonds linked to subprime mortgages and other risk assets.
Those losses threaten the top credit ratings that insurers need to win new business. If insurers are downgraded by ratings agencies, investors that can only hold top-rated bonds may have to sell billions of dollars of securities, lifting borrowing costs for cities and consumers alike.
About two-thirds of bond insurers' business is guaranteeing municipal debt, and one-third is insuring repackaged consumer debt.
Higher borrowing costs and general credit market difficulties "could be a financial tsunami that causes substantial damage throughout our economy," Spitzer said in the testimony prepared for delivery to a House of Representatives Financial Services subcommittee at 11:30 a.m. (1630 GMT) on Thursday.
Spitzer's comments echoed recent remarks from Deutsche Bank Chief Executive Josef Ackermann, who said that bond insurer downgrades could send shockwaves through financial markets.
Regulators hope to help bond insurers keep their top credit ratings, but are also looking at protecting only the insurers' municipal bond insurance segments, Spitzer said.
"We have been clear from the beginning that municipal investors cannot be allowed to suffer from problems caused by another sector of the market," he said.
Japan Economy Grows 3.7%, Twice as Fast as Expected (Update5)
By Jason Clenfield
Feb. 14 (Bloomberg) -- Japan's economy grew 3.7 percent last quarter, twice the pace economists forecast, as business investment rose and exports to Asia helped companies weather the U.S. slowdown.
Gross domestic product in the three months ended Dec. 31 accelerated from a 1.3 percent expansion in the third quarter, the Cabinet Office said today in Tokyo. The median estimate of 39 economists surveyed by Bloomberg News was for annualized growth of 1.7 percent.
The Nikkei 225 Stock Average surged the most in six years after the report and an unexpected increase in U.S. retail sales allayed concern that the world's two biggest economies may slip into a recession. Bonds fell as investors pared bets that Governor Toshihiko Fukui's successor at the Bank of Japan will have to cut interest rates.
``The person happiest with this data has to be Mr. Fukui,'' said David Cohen, director of Asian forecasting at Action Economics in Singapore. ``This certainly suggests that as long as the whole world doesn't go over the edge, Fukui's model of continued, modest growth is still valid.''
The chance of a rate cut by December fell to 31 percent after the growth report from 47 percent, according to calculations by JPMorgan Chase & Co. Economists predict Fukui will hold the key rate at 0.5 percent tomorrow at the end of his second-to-last policy meeting. Fukui's term expires March 19.
The Nikkei rose 4.3 percent to 13,626.45, its steepest gain since March 2002. The yield on Japan's 10-year bond rose 5 basis points to 1.465 percent.
U.S., European Growth
Japan, the world's second-largest economy, expanded 0.9 percent from the previous quarter. Growth in the U.S., the country's biggest market, slowed to 0.2 percent from 1.2 percent in the same period. The European Union probably grew 0.3 percent in the fourth quarter, less than half the pace of the previous three months, economists expect a report to show today.
Net exports -- or the difference between exports and imports -- contributed 0.4 percentage point to growth. Exports rose 2.9 percent from the previous quarter, as record sales to Asia countered waning demand from the U.S.
Sales at Toyota Motor Corp. and Canon Inc., the country's biggest makers of cars and cameras, rose in the three months to Dec. 31 as demand from emerging markets increased.
``The U.S. still matters but there's a more balanced source of demand than there was 10 years ago,'' Cohen said. ``That's a reason not to be too pessimistic about Japan.''
Corporate Investment
Rising demand from Asia, Russia and the Middle East encouraged companies to increase spending on factories and equipment. Capital investment rose 2.9 percent in the fourth quarter, accounting for about half of growth in the period. Economists had expected a 0.9 percent increase.
``Yes, companies are worried about the U.S., but they're still investing,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. The Bank of Japan's quarterly business survey showed companies planned to increase spending and ``this confirms that people are putting their money where their mouths are.''
Still, other reports suggest companies are bracing for a slowdown. Machinery orders fell for a second month in December. Manufacturers plan to cut production in January and February, the Trade Ministry said last month.
U.S. Slowdown
Economic and Fiscal Policy Minister Hiroko Ota said today that ``downside risks'' for the economy are rising and a slowdown in the U.S. will eventually affect exports.
Omron Corp., a maker of factory sensors and a supplier of parts to Nissan Motor Co., last month cut its sales forecast for the year ending March 31, citing a drop in domestic orders for sensors used to automate assembly lines. Advantest Corp., the world's biggest maker of memory-chip testers, slashed its sales outlook 22 percent after clients reduced orders.
The economy continued to suffer from a construction slump. Housing investment fell 9.1 percent last quarter because of a permit logjam caused by government rules designed to stop building fraud.
Housing starts plunged in the six months since the rules were introduced in June. The latest figures show that the drop in starts is slowing and the industry is making up lost ground.
``A recovery in the construction sector could add half a percentage point to GDP growth in 2008,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``That's enough to counter a smaller contribution from trade. The big unknown is the consumer side.''
Consumer Spending
Private consumption edged up 0.2 percent from the previous quarter, less than economists' expectations of a 0.3 percent gain. Reports show spending may weaken.
Household sentiment slumped to the lowest level in more than four years in January as falling wages and rising prices eroded spending power. Applicants outnumbered job offers for the second straight month in December.
Rising oil prices may have boosted growth in real terms. The GDP deflator, a broad measure of prices used to calculate real growth from nominal, fell 1.3 percent from a year earlier, the biggest drop since the first quarter of 2006. The deflator is adjusted downwards when oil prices rise. In nominal terms the economy grew an annual 1.2 percent in the fourth quarter.
The GDP figures are preliminary and will be revised on March 12.
Citigroup banker is new DBS chief executive
By Grace Ng
Feb 14, 2008
ONE of corporate Singapore's plummest jobs, chief executive of DBS Group Holdings, has gone to veteran American banker Richard Stanley.
His appointment follows a five-month global search to replace Mr Jackson Tai, another American, who stepped down at the end of last year.
Mr Stanley, 47, is currently Citigroup's country officer for China, based in Shanghai. He has submitted his resignation and will move to Singapore to start work at DBS on May 1.
DBS is a leading listed company and the top home-grown financial institution. The CEO job usually has a multi-million dollar pay packet, though Mr Stanley's remuneration has yet to be disclosed.
Mr Stanley has lived here twice before while working for Citigroup. He was here for about six years in the 1990s. He married Singaporean Koh Li Peng, who had won the Miss Singapore crown in 1984 and later also won the Mrs Singapore title. They have three children - a son doing national service, a teenage daughter and a young son.
DBS said in a statement yesterday that Mr Stanley was picked as 'the most suitable candidate to lead DBS to the next level'.
He has worked at Citi for 27 years, mainly in investment and corporate banking roles. He was chosen from candidates who have been said to include Mr Francis Rozario, head of Temasek Holdings' financial investment firm, and Mr Mike DeNoma, Standard Chartered Bank's executive director for consumer banking.
The news was welcomed by DBS staff. One said he was 'glad that the period of waiting and uncertainty is finally over'. Another wondered about 'rotations or changes in senior management'.
Indeed, Mr Frank Wong, DBS chief operating officer and vice-chairman, will step down at the end of the year.
A DBS spokesman told The Straits Times: 'Frank expressed his desire to retire in 2006, but kindly agreed to defer his retirement plans time and again.' He would stay at DBS until later this year to ensure a smooth transition.
Analysts such as Mr Mathew Wilson of Morgan Stanley lauded the move.
He said in a note to clients that Mr Stanley is 'a leader who should be well-acquainted with the workings, opportunities and risks in the region'.
DBS chairman Koh Boon Hwee said: 'As a seasoned banker with a proven track record in Asia, Richard is well-positioned to help DBS grow our regional footprint, diversify our revenue base and focus on higher-return businesses.'
Former colleagues at Citi described him as a friendly 'people person' with 'strong skills in fostering a good culture in an organisation'.
Now, two of the three local banks will be helmed by former Citibankers. Mr David Conner, OCBC Bank chief executive, was Mr Stanley's boss more than a decade ago.
Mr Stanley had moved to Singapore in 1990 and served as Citi's head of financial institutions and securities services division. In 2004, he returned as country officer in Singapore, where he oversaw Citi's corporate banking, corporate finance, investment banking and other activities.
Older fathers have healthier offspring, say Canadian study
13 February 2008
For a young woman in search of a suitable partner, an older man could be a better bet for producing healthy offspring than a hormone-fuelled teenager, researchers have found.
The largest study investigating the influence of paternal age on the chances of having a baby with birth problems has found that fathers under the age of 20 are at highest risk.
Babies born to teenage fathers were 22 per cent more likely to die in the first four weeks and 41 per cent more likely to die in the first year than those born to fathers in their 20s. They were also up to 17 per cent more likely to be born early and have a low birth weight.
There was no increased risk for babies born to older fathers, aged 40-plus. All the mothers in the study, published in the medical journal Human Reproduction, were aged 20 to 29, to eliminate the influence of maternal age.
Professor Shi Wu Wen, of the Ottawa Health Research Institute, Canada, who led the study, said the findings had potentially serious implications.
"Although the increased relative risks for most outcomes were small the magnitude of the risk to society could be huge, if the increases we found are truly attributable to paternal age."
However, it was also likely that social factors played a part.
Teenage fathers were more likely to be poorer than older fathers in their 40s, less well educated and less likely to bring their partners for antenatal care when potential birth problems could be anticipated.
Allan Pacey, senior lecturer in andrology at the University of Sheffield, said: "It would be easy to point the finger at younger father's sperm and say that they were inadequate in some way.
"But that bucks the trend of many studies that have shown there are increasing sperm DNA defects as men get older.
"A far more convincing explanation for the finding in this study is that older men are simply better able to provide for their pregnant partners than younger fathers. It makes sense that babies born to older fathers probably have a better start to life.
Caning coming for 'upskirt' pics students
07 February 2008
Two 14-year-old Singaporean boys tried to take upskirt photos of their female teacher last week.
They were caught when many of their classmates, who witnessed the incident, approached the teacher in question and told her what happened.
The result: The two boys will be publicly caned.
The teacher made a police report on Thursday.
This is not the first time that such an incident has happened in the boys' school, located in the North-East.
Last year, two other boys were publicly caned for taking upskirt pictures of another teacher with their handphones.
Regarding last week's incident, the school principal told my paper: "We confiscated the boys' phones and found no evidence on them.
"They tried to take pictures but failed. Nevertheless, they will be caned publicly."
The boys confessed that they did attempt to take the picture.
She added: "We always advise our teachers that since they are teaching in a boys' school, they must be careful.
"They are also advised against sitting on tables if they are wearing skirts."
However, she said, as most handphones now come with cameras, the problem has become more complex.
She said: "There is the problem of them forwarding the obscene pictures to their friends."
To counter this, the school has banned the use of handphones in classrooms.
She added: "If they are caught, we will confiscate their handphones.
"And if we find pornographic or upskirt pictures in the phone, we will hand them over to the police."
She added that she does not tell her teachers not to wear skirts because it gives the wrong impression that the teacher is at fault.
She said: "This suggests that it's their (the teachers') dressing that provokes the boys to take the pictures and this is wrong."
The police confirmed that a report has been filed and are investigating the matter.
Some parents are calling for a recommended dress code for female teachers, saying they are sending the wrong message to male students.
CPO prices drop further on weak crop data
By IZWAN IDRIS
February 14, 2008
PETALING JAYA: Crude palm oil (CPO) prices extended losses to a second day, brought down by weak latest monthly crop data from the Malaysian Palm Oil Board (MPOB) yesterday.
But market sentiment remained firm on buoyant competing edible oil prices overseas, traders said.
The third month CPO futures contract on Bursa Derivatives, which is the global benchmark for palm oil, eased a further RM15 to RM3,360 per tonne yesterday.
The contract hit a record RM3,458 per tonne in intra-day trade last week.
MPOB's most recent monthly statistics showed palm oil stockpiles in January had surged 11.5% to a new high of 1.875 million tonnes from 1.68 million tonnes in December.
The jump was attributed to a 2% increase in production to 1.42 million tonnes during the month, while exports fell 24% to 1.04 million tonnes.
Global fears that supply of vegetable oil would continue to lag rising demand from very large economies like China and India had lifted CPO price by 77% over the past one year and soybean oil by 73% during the same period.
Palm oil remained the cheaper vegetable oil compared with close rival soybean oil on a pound for pound basis.
In Chicago, soybean oil futures remained less than 1% lower from a record 55.76 US cents per pound set earlier this month. According to Bloomberg data, palm oil is about 8.5 US cents per pound cheaper than soybean oil.
Analysts said the adverse weather that had affected soybean production in the Argentina, China and India would continue to support palm oil prices.
They said a shortage in soybean supply would benefit palm oil, as both are widely used in cooking, as well as to make cosmetics and can be blended with fossil fuel to make biodiesel. Soybean oil is derived by crushing soybean.
MPOB last month said palm oil production in Malaysia would hit 16.2 million tonnes this year, up from 15.8 million in 2007. The forecast increase was based on improving yield outlook and expansion in planted area.
“However, the outlook for palm oil continues to remain positive in view of the global oils and fats (supply) tightness and the volatility of crude oil prices,'' the agency said.
Singapore Airlines keeps China in its sights
February 14, 2008 - 3:13PM
Singapore Airlines is expected to ramp up its bid to grab a bigger share of the world's fastest growing aviation market in China by sweetening the terms of a failed offer for China Eastern or by targeting another carrier.
SIA is Asia's most profitable airline but its lack of success in seizing new routes is exposing it to growing competition in the region, where carriers from India to China are expanding.
The lack of a clear growth strategy as SIA awaits a China deal, coupled with a slowdown in global travel, has led analysts to cut profit forecasts for the carrier.
SIA, 55% owned by state investment firm Temasek Holdings, lost a bid last month for a stake in China Eastern after it was effectively blocked by the mainland carrier's bigger rival Air China.
But most analysts expect it to make a second bid or turn to smaller regional carriers which could be less sensitive targets.
"China will be a major driver in business and premium traffic, so it's crucial for SIA to get into that market," said CIMB-GK analyst Raymond Yap.
SIA and Temasek's $US920 million bid for 24% of China Eastern initially received the blessings of the Chinese government, but was voted down in January after objections from some China Eastern shareholders and a counter-offer by Air China.
Analysts had expected the China Eastern stake to boost SIA's earnings by 5% in the first year, but the greater benefit would be more access to China's rapidly growing domestic market.
SIA, which now serves five Chinese cities including Beijing, Shanghai and Hong Kong, could gain access to China Eastern's 105 international and 308 domestic routes through future joint operations beyond China Eastern's hub in Shanghai.
While global travel demand is expected to be dampened by a U.S. recession, China is forecast to be Asia's fastest-growing aviation market, with double-digit growth up to 2011.
"What they do next depends very much on the vibe they get from the Chinese, especially after the difficulty with China Eastern," said Standard & Poor's analyst Shukor Yusof.
SIA said it remains interested in China Eastern, but said the next step is up to the mainland carrier.
"China is a very important market for Singapore Airlines," spokesman Stephen Forshaw said, while reiterating the position that "the price offered is the maximum justified by the business fundamentals".
Merrill Lynch analyst Paul Dewberry thinks SIA could offer sweeteners to China Eastern's shareholders such as a special dividend.
Others said SIA should look at smaller regional carriers.
"Shanghai Airlines is a viable alternative which would be much easier to integrate," said Cazenove analyst Andrew Au.
Citigroup analyst Corrine Png, who recommends investors sell the stock, cited SIA's lower growth prospects compared to rivals such as Hong Kong-based Cathay Pacific and Air China.
"M&A opportunities are relatively limited given regulatory constraints and the lack of attractive investment targets."
But Singapore Airlines could look to other avenues for growth if its China plans stall, through its partly-owned low-cost carrier Tiger Airways or by bidding for Toll Holdings' 62% stake in Virgin Blue, Australia's No. 2 carrier.
Virgin Blue is seen as the main beneficiary of an open skies deal being negotiated between the United States and Australia, which could open the prized U.S.-Australia route to competition.
SIA could also open new passenger and cargo routes in Europe and North America, thanks to a slew of open skies pacts signed by the Singapore government.
"Each of these deals could open up new network opportunities, so Singapore Airlines still has growth prospects," said Yusof.
A UK pact will take effect from end March, but SIA said it is not likely to add new services in the short term.
The problem is getting the rights to land or depart at an airport - a difficult task especially at London's highly congested Heathrow airport.
REUTERS
Allco Finance defers results to Feb 18
14 February 2008
Allco Finance Group Ltd has deferred its first half results announcement to Monday, February 18.
The company was expected to announce its result on Friday.
"The shares will remain in voluntary suspension," it said.
Shares in Transport infrastructure specialist Allco fell as $1.70 on January 21.
API, a private investor and Allco's largest shareholder, was forced by two of its margin lenders to dump 46 per cent of its holding in the group.
The margin calls were triggered by a run on Allco's shares, fuelled by growing investor concern about the level of debt used in its investment strategy.
The shares have since recovered to $3.05, when they last traded on February 11.
S'pore's Q4 GDP shrinks 4.8%
February 14, 2008
SINGAPORE - Singapore's economy shrank by an annualised, seasonally adjusted rate of 4.8 per cent in the fourth quarter, worse-than-expected and the first quarterly contraction since 2003 as weak manufacturing dragged on growth, data showed on Thursday.
The figure was below an advance official estimate of a 3.2 per cent contraction. The estimate, issued in January, was based largely on data from October and November.
The Government also cut the forecasts for this year's economic growth. It said the economy will grow between 4-6 per cent, from a previous forecast of 4.5 to 6.5 per cent.
From a year earlier, Singapore's economy expanded by 5.4 per cent in the three months to the end of December, compared with an advance estimate of 6.0 per cent, and bringing growth for 2007 to 7.7 per cent.
Manufacturing expanded just 0.2 per cent in the fourth quarter from a year earlier, while construction grew 24.3 per cent. The financial services sector grew 15.9 per cent.
Inflation forecast raised
Singapore raised its inflation forecast for 2008 to 4.5 to 6.5 per cent on Wednesday, from a previous forecast of 3.5-4.5 per cent.
'Inflation should get worse before it gets better,' said Ravi Menon, second permanent secretary of the Trade Ministry, adding it was expected to peak in the first half of the year and moderate in the second half.
The central bank ruled out tightening monetary policy. 'Current conditions suggest that the US will likely enter a mild recession in the first half,' the Ministry of Trade and Industry said in a statement. 'The key uncertainty is over the length and severity of this slowdown.'
However, Singapore does not itself expect to sink into recession, defined as two consecutive quarterly declines in GDP, as it thinks Asian economies will remain relatively robust.
'Most of the simulations we have done do not show that outcome,' said Mr Menon.
Sing dollar slips
The Singapore dollar hit a one-week low on Thursday after data showed a steep contraction in the economy, while the Chinese yuan rebounded after falling sharply in post-holiday trade the previous day.
The Singapore dollar fell as far as 1.4215 per US dollar, down a third of a per cent from late Asian trade on Wednesday, as data showed the economy shrank by an annualised, seasonally adjusted 4.8 per cent in the fourth quarter.-- REUTERS
Money Market Rates Tumble; Central Banks Inject Funds (Update8)
By Gavin Finch
Dec. 18 (Bloomberg) -- The cost to borrow in euros plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease credit-market gridlock through year-end.
The two-week euro interbank offered rate dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had climbed 83 basis points in the past two weeks as banks anticipated a squeeze on credit through the end of the year.
``These are strong-arm tactics intended to show the market they're seriously committed to breaking the deadlock,'' said Marc Ostwald, a fixed-income strategist at Insinger De Beaufort SA in London. ``The ECB is helping to bankroll banks out of a problem that they themselves created.''
The decline may signal that policy makers, in their first coordinated action since Sept. 11, 2001, are making headway in reviving lending between banks. The credit-market crisis has caused banks from UBS AG to Deutsche Bank AG to report writedowns on securities linked to U.S. subprime mortgages, and sent money-market rates soaring.
The Bank of England also held the first of two special operations today, offering three-month loans in pounds. Yesterday, the Federal Reserve auctioned one-month cash in dollars, the first of four such operations.
The central bank measures have had mixed results. The one- month dollar rate fell 2 basis points to 4.95 percent, 70 basis points more than the Fed's key rate, according to the British Bankers' Association. The cost of three-month loans in pounds declined 4 basis points to 6.39 percent, 89 basis points more than the Bank of England benchmark, the BBA said.
`Fundamental Issues'
The ECB action ``doesn't address the fundamental issues of banks hoarding cash and while the central bank has succeeded in stabilizing the shorter-term rates, it makes little impact on the longer-term rates,'' said Lena Komileva, an economist at Tullett Prebon in London.
The cost of borrowing euros for two weeks is still 45 basis points higher than the ECB's benchmark financing rate. It was 9 basis points higher at the end of June.
The ECB loaned 348.6 billion euros ($501.5 billion) for two weeks at 4.21 percent today, almost 170 billion euros more than it estimated was needed. It was the Frankfurt-based bank's biggest open-market operation.
TED Spread Narrows
The TED spread, or difference between what the U.S. government and banks pay for three-month loans, narrowed for a fifth day to 189 basis points, indicating an increased willingness among banks to lend. The spread was 35 basis points at the start of the year.
Bids were received from 390 banks, ranging from 4 percent to 4.45 percent, the ECB said today. The central bank first offered extra cash on Aug. 9, when it lent 95 billion euros of emergency funds. Banks also borrowed about 2.4 billion euros at 5 percent yesterday, the most since Sept. 26, the ECB said.
The three-month euro-borrowing rate fell 7 basis points to 4.88 percent, down from near a seven-year high, the EBF said.
``Maybe this is the sign we've all been waiting for that a peak in Libor has been reached,'' said Patrick Jacq, a fixed- income strategist at BNP Paribas SA in Paris. ``It's a definite sign of an improvement in the market.''
The cost of borrowing in dollars for two weeks increased 1 basis point to 5.10 percent, the BBA said today. The Fed yesterday offered $20 billion in one-month loans. The results will be announced tomorrow.
BOE Operation
The corresponding rate for pounds soared a record 77 basis points to 6.51 percent, the BBA said. Today is the first day that pound-denominated loans cover a borrower's commitments through the end of the year.
The Bank of England offered 10 billion pounds ($20 billion) of three-month cash. It received 10.9 billion pounds of orders for the loans, lending at an average of 5.949 percent. The central bank's benchmark interest rate is 5.5 percent.
Central banks in the U.S., U.K., Canada, Switzerland and the euro region are responding to subprime mortgage-related losses at financial institutions including Citigroup Inc., Merrill Lynch & Co. and Bank of America Corp.
Goldman Sachs Group Inc. estimated last month losses related to record home foreclosures in the U.S. may be as high as $400 billion for financial companies. If accurate, banks, brokerages and hedge funds would need to cut lending by $2 trillion, triggering a ``substantial recession,'' the firm said.
U.S. corporate defaults probably will quadruple next year after the number of companies that lost their investment-grade credit ratings rose at the fastest pace since 2003, according to Moody's Investors Service.
Fed stands ready to ease further, Bernanke says
By Greg Robb
Feb. 14, 2008
WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke said Thursday the central bank was ready to cut interest rates further if fresh signs of a weaker-than-expected U.S. economy emerge.
The Federal Open Market Committee, which sets Fed monetary policy, "will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke told the Senate Banking Committee in prepared testimony.
The Fed has done a lot to stave off a recession but stands ready to do more if the outlook darkens, he said.
Financial markets showed little reaction to Bernanke's testimony, most likely because it was not surprising, analysts said.
"Given that markets are already discounting a very weak economic environment ... the Fed chairman's remarks were pretty much greeted with a yawn," said Josh Shapiro, chief U.S. economist at MFR Inc.
Fed economists will be burning the midnight oil to gauge if the rate cuts undertaken so far are having their intended effects, Bernanke said.
In his brief written remarks, Bernanke painted an "improving picture" for the economy, saying he expects a stronger pace of expansion starting later this year after an unspecified "period of sluggish growth."
Inflation should moderate from its current rate, and the public's expectation of inflation should remain "reasonably well anchored," he said.
At the same time, the credit squeeze should continue to dampen growth, and there is no end in sight to the downturn in the housing sector, he said.
But the Fed chairman was clear about the downside risks.
"Although the baseline outlook envisions an improving picture, it is important to recognize the downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," Bernanke said.
No respite for housing's woes
Bernanke also said there was no sign of an end to the downturn in the housing market. He said the credit squeeze would also dampen growth in coming months.
Bernanke didn't address the lessons of the financial markets' meltdown. In general, federal regulators have been mum on this score, perhaps in the belief that there is enough blame to go around for everyone from the executive branch to the legislative branch and independent agencies.
Also Thursday, Treasury Secretary Henry Paulson told legislators that he's focused on ways to reduce the effect of the credit squeeze on the economy through efforts to work to minimize foreclosures. Paulson said Wednesday that the President's Working Group on Financial Markets is still considering regulatory reform issues behind closed doors.
And Securities and Exchange Commission chief Christopher Cox told legislators that said his agency is mulling new rules for credit-rating agencies in response to problems experienced with the ratings of complex securities based on subprime residential mortgages.
UBS Won't Support Failing Auction-Rate Securities (Update4)
By Martin Z. Braun and William Selway
Feb. 14 (Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation.
The second-biggest underwriter of the securities, whose rates are reset periodically at auctions, notified its 8,200 U.S. brokers of the decision yesterday, said the person, who declined to be identified because the announcement wasn't publicly disclosed. Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Citigroup Inc. allowed auctions to fail as mounting losses from the collapse of subprime mortgages causes capital markets to seize up.
As much as $20 billion of auctions didn't attract enough buyers yesterday, an 80 percent failure rate, based on estimates from Bank of America Corp. and JPMorgan Chase & Co.
``We are kind of in uncharted territory right now,'' said Anne Kritzmire, a managing director for closed-end funds at Nuveen Investments in Chicago.
Auctions are failing as confidence in the creditworthiness of insurers backing the securities wanes, and as loss-plagued banks seek to avoid tying up their capital. More than 129 auctions failed yesterday, Kritzmire said.
Rohini Pragasam, a spokeswoman for UBS, the second-biggest underwriter of municipal auction-rate debt after Citigroup in 2006 according to Thomson Financial, declined to comment. UBS, the dealer on the hospital corporation's auction, today posted the biggest-ever loss by a bank for the fourth quarter. The stock declined $3.05, or 8.25 percent, to $33.94 at 11:47 a.m. in New York.
Auction-Rate Resets
Auction bonds have interest rates determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.
Investors have little opportunity to judge the risk that auctions will fail because of little public disclosure about interest rates set at the periodic bidding or other details such as how many bids were submitted or how many bonds were offered for sale.
The Municipal Securities Rulemaking board is working on changes to its trade reporting system that would reveal at least the interest rate on auction bonds when they are traded. Currently, only the price is disclosed.
Greater `Transparency' Sought
``I think you need to have more transparency in terms of the market so that investors can judge liquidity risks and so that people, both retail investors and corporate investors, can decide where they want to put their money,'' Joseph Fichera, chief executive officer of Saber Partners, a New York based financial adviser to local governments, said in an interview on Bloomberg Television.
Until recently, UBS and other banks that collect fees for running auctions have stepped in with their capital to prevent failures when bidding faltered. These firms have grown unwilling to commit their money to auction-rate securities after suffering at least $133 billion in credit losses and mortgage writedowns stemming from the subprime mortgage collapse.
Unwilling to Bid
``If you talk to the dealers, their balance sheets are getting flooded with these auction-rate certificates right now,'' said Doug Dachille, who oversees $7 billion in fixed- income securities as chief executive officer of First Principles Capital Management LLC in New York. ``Right now, the way they're dealing with the issue is they won't bid. That's why we're seeing failed auctions.''
Auctions began stumbling three weeks ago when banks couldn't drum up enough demand for auction rate bonds sold by borrowers, including Georgetown University and Nevada Power. Since then, auctions have failed for frequent and well-known borrowers, such as Port Authority of New York and New Jersey and New York state's Metropolitan Transportation Authority.
``We're hearing it's a general reaction to the auction market,'' said Marlene Zurack, senior vice president for New York City's Health and Hospitals Corp., whose auction yesterday of $64.9 million of bonds failed. ``The truth is our credit is good, our ratings are good, our bond insurer is unscathed, and it still happened.''
Massachusetts has sold $565 million in auction-rate securities, including two series of bonds sold in 2000, according to state treasury spokeswoman Alison Mitchell. An auction to reset rates on one of those series failed yesterday, and the rate reset to 4.473 percent from 3 percent, she said.
Insurance at Issue
Eighty percent of the $15 billion to $25 billion of auction-rate bonds scheduled for bidding daily didn't attract sufficient bids yesterday, according to Alex Roever, a JPMorgan Chase & Co. fixed income analyst.
The failures show the widening impact of the bursting of the U.S. housing bubble, which has caused rising defaults on home loans and threatened the credit ratings of the insurance companies that guaranteed structured securities -- such as collateralized debt obligations tied to mortgages -- against default.
The waning strength of some bond insurers has caused investors to trim holdings of debt backed by companies such as Ambac Financial Group Inc.'s Ambac Assurance Corp., concerned that it may be difficult to sell such debt should insurers' problems worsen. That has hurt borrowers such as the Port Authority, whose auction debt soared to 20 percent on Feb. 12 from 4.3 percent a week ago even though there is little risk of default.
Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.
NY regulator: Bond insurers may be split up
Thu Feb 14, 2008 8:27am EST
By Dan Wilchins and Patrick Rucker
NEW YORK/WASHINGTON (Reuters) - New York insurance regulator Eric Dinallo, who is heading up efforts to rescue bond insurers, is set to testify that he will consider allowing the companies to split their relatively strong municipal bond guarantee businesses off from the problem parts of their businesses.
According to prepared testimony obtained by Reuters, New York Insurance Superintendent Dinallo prefers to protect all parts of the bond insurers' business, but if it becomes clear that is not possible, his first priority is to protect municipal bond issuers and investors.
Reuters first reported on Tuesday that insurers could be split.
Dinallo is also looking at increasing regulation for the bond insurers, including potentially looking carefully at all of an insurers' positions, the way a rating agency would.
Dinallo is set to speak later on Thursday before the House Subcommittee on Capital Markets.
U.S. bond insurers, which guarantee more than $2.4 trillion of securities, are expected to make billions of dollars of payouts after guaranteeing repackaged subprime mortgages and other risky debt.
Those payouts may trigger ratings downgrades, force investors to sell billions of dollars of bonds, and lift borrowing costs for city governments and consumers.
The bond insurer problem must be fixed, or else it could become a "financial tsunami" that wreaks havoc on the broader economy, according to separate prepared testimony from New York Governor Eliot Spitzer obtained by Reuters.
MBIA Inc., the largest bond insurer in the world, is set to testify on Thursday that short-sellers are partly to blame for the decline in confidence in bond insurers, and plans to suggest regulators and lawmakers curtail the efforts of short-sellers, who profit when a company's shares decline.
Regulators are working with banks, private equity firms, and others to bolster the capital levels of bond insurers and prevent downgrades. But the discussions are difficult, according to Dinallo's testimony.
A group of banks is working with bond insurer Ambac Financial Group Inc on a possible rescue, while another group is working on a potential bailout of FGIC Corp.
Billionaire Wilbur Ross is considering investing money in a bond insurer, and Warren Buffett said earlier this week on television network CNBC that he has offered to reinsure three bond insurers' municipal bond exposure.
If strengthening a bond insurer is not possible, regulators will consider allowing the healthy municipal insurance businesses to split themselves away from the portion of the business that guaranteed repackaged subprime mortgage bonds and other troubled bonds, Dinallo's testimony says.
Municipal bond guarantees account for about two-thirds of bond insurers' businesses.
Bond insurers have days to re-capitalize, Spitzer says
By Alistair Barr
Last update: 12:32 p.m. EST Feb. 14, 2008
SAN FRANCISCO (MarketWatch) -- Bond insurers have four to five business days to re-capitalize themselves enough to keep their crucial AAA credit ratings, New York Governor Eliot Spitzer said during a Congressional hearing on the $2.4 trillion industry on Thursday. If that doesn't happen, regulators will have to step in and separate bond insurers' municipal businesses from their more troubled structured finance units. "We will need to move in that direction. It is not our first choice but time is short," Spitzer said. "In the next for or five bus days we would like to see a resolution," Spitzer added. "It's time for deals to get done."
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