Thousands of Hong Kong factories in China may close
HONG KONG (AFP) — Up to 14,000 Hong Kong-owned factories in southern China may close in the next few months, in part due to the crippling winter weather that hit the nation earlier in February, a report said Monday.
Labour and power shortages in the aftermath of the heavy snowstorms will hurt operations, Clement Chen, chairman of the Federation of Hong Kong Industries (FHKI), told The Standard newspaper.
China’s worst winter in 50 years paralysed transport networks, leaving hundreds of thousands of migrant workers from the north stranded in the Pearl River Delta ahead of the Lunar New Year.
Many of the workers returned home late for the country’s biggest holiday, and Chen estimated more than 30 percent of them may still not have gotten back when factories re-opened on Monday.
About 70,000 factories employing 9.6 million people in the booming manufacturing delta area are run by Hong Kong businessmen -- 70 percent of the total number of factories there.
But Chen said some 14,000 Hong Kong-owned factories there will close this year, citing factors such as rising wages, increasing costs of raw materials and oil, a strengthening yuan and the economic slowdown in the United States.
“The snowstorms have merely worsened the situation,” he told the newspaper.
Another factor: migrant workers may opt to stay in their villages since salaries were no longer as far behind those in southern Guangdong province, where many factories are located.
“According to our experience, only 70 out of every 100 workers will come back to work after the New Year holiday,” Chen said.
NEW YORK - BANKS in the United States have been quietly borrowing ‘massive amounts’ from the US Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.
The newspaper said the use of the Fed’s Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly US$50 billion (S$71 billion) of one-month funds from the Fed by mid-February.
The Financial Times said the move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks’ growing reliance on indirect forms of government support. -- REUTERS
Northern Rock's rescue is part of a geopolitical sea change
This is no blip. The global economic crisis will burst the bubble of free-market doctrine and force states to take a more active role
Martin Jacques February 18 2008
The world is holding its breath, still trying to grasp the potential enormity of what is unfolding. Economic downturns and stock market crashes are hardly unfamiliar, of course, even if a decade or so seems a long time ago for western consumers habituated to rising house prices and non-stop shopping. But this crisis threatens to be rather different, a Big One. Already it has forced the government to engage in what has been a heresy for almost three decades: nationalisation. Major crises such as the Northern Rock debacle are not matters of punctuation or pauses for reflection, but defining historical moments, marking the end of one era and the beginning of another. The 1970s was a classic case, as huge oil price hikes fed an inflationary spiral that brought both the long boom and the postwar welfare consensus to an end, and led to the rise of neoliberalism and deregulation.
This crisis, however, threatens to be even more fundamental. While the 1973 gyrations were the result of a temporary shift of power from the industrial world to Opec, the underlying cause this time is permanent and far-reaching - a fundamental shift in power from the developed world to the developing world, and above all China and India. We have not witnessed anything like this since the inception of the west as an industrial powerhouse in the 19th century.
The economic and political consequences will be of such a scale that they are impossible to comprehend. The present crisis has been long in the making, even if it has been obscured by the US spending over a decade in denial, as illustrated by the absurd post-9/11 neoconservative hubris about America becoming a latter-day Rome and the failure to address the growing imbalances between the US as a huge over-spender and East Asia as a massive saver.
There are two conclusions that we can draw from the economic crisis that began last August and might, in some form or another, last for a prolonged period. First, it heralds a major reduction in the global economic and political influence of the US, rather in the manner that the 1931 crisis announced the final and belated end of Britain's global economic supremacy. Fundamental systemic crises are often associated with the decline of the dominant imperial power and its increasing inability to sustain the system over which it had previously presided. The profound instability of the interwar period owed much to Britain's inability to maintain its role.
The present crisis, at root, is a consequence of the economic decline of the US and its increasing weakness at the apex of an international financial system of which it was the architect and chief beneficiary. This is most clearly expressed in the US's chronic balance of payments deficit and its long-term dependence on East Asian inward capital flows to shore up the value of the dollar. Perhaps the present turmoil will ease, but in truth the old arrangements are now coming apart and, in anything other than the short term, seem patently unsustainable. We are entering a period of protracted instability as the old order breaks down, the US seeks to resist change and the world embarks on a conflictual and painful passage towards a new global economic order.
The second conclusion is that the political consequences of this shift will be enormous. The interwar crisis led to the second world war and the birth of Keynesianism. The less significant Opec crisis of the 1970s destroyed the social-democratic consensus and led to the triumph of neoliberalism. And this time? One thing seems certain: the neoliberal orthodoxy will be undermined. This could come in many different forms. It could lead to a rise of protectionism in the US and Europe against developing countries such as China, or new regulations designed to prevent sovereign wealth funds from taking over what are deemed key strategic assets.
When the free market and deregulation are the means by which the western world extends its global economic power over the developing world, then they are deemed highly virtuous, but it is a different matter when they become the instrument by which developing countries can extend their influence over western economies. Similarly, during a recession the state is likely to be called into active service on a far more regular basis as western governments seek to deal with the mushrooming effects of market failure. It is not an accident that developing countries - virtually the whole of East Asia, for example - view the role of the state in a far more interventionist way than does the Anglo-Saxon world. Laissez-faire and free markets are the favoured means of the powerful and privileged. The decline of the western world could well usher in a significant change in this mind-set.
How will our own political elite respond to these changes? At best, very belatedly. Thatcherism, after all, was native to this country, a response to the 1970s crisis, and it has subsequently shaped the outlook of the governing elite to a greater extent than anywhere else apart from the US. To this day that elite remains shackled by its logic and assumptions. A classic illustration of this has been the timidity and cowardice of the government in the face of Northern Rock - the first domestic political challenge of the new global crisis. The Tories engaged in a similar knee-jerk response: the only voice of reason was provided by then acting Liberal Democrat leader Vincent Cable, who rose above the prevailing fear and prejudice, and had the courage from the outset to think outside of the ideological box. Finally, the government now seems to have come round to his view.
The political terrain is shifting. Attitudes towards the US are a case in point. The move towards neoliberalism in Britain was intimately bound up with the embrace of the US as the country to be aped and copied. The American model was celebrated by Thatcherites and New Labour alike, California worshipped as the model of the future, "Anglo-Saxon" embalmed as the fitting metaphor for the shared Anglo-American legacy, Europe denigrated and the rest of the world ignored. How perceptions of the US have changed: a country living beyond its means, dependent on large helpings of Asian credit, characterised by huge inequalities, its great financial institutions guilty of huge folly, forced to rely for their salvation on the sovereign wealth funds of China and elsewhere. And, remember, we are only at the very beginning of the biggest geopolitical shift since the dawn of the industrial era.
BEIJING, Feb. 19 (Xinhua) -- China's consumer price index (CPI), the main gauge of inflation, broke a decade-record to hit 7.1 percent in January, which experts believe will lead to further resolute tightening measures by the government.
The January's figure was the highest monthly level since 1997. The previous record was pinned at 7.0 percent in December of 1996.
The 7.1-percent rise was as expected by most market analysts, but slightly lower than the prediction of China's major state-owned bank. The Bank of China forecast the CPI for January would jump 7.5 percent or higher.
The bureau said food prices ballooned 18.2 percent in January from a year earlier, grain prices rose 5.7 percent and cooking oil prices increased by 37.1 percent.
Pork prices, which had been blamed as the major factor driving up CPI figures throughout the later half of last year, soared 58.8percent in January, the bureau said.
"The CPI was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country's areas and food price hikes during the Spring Festival," said Yao Jingyuan, the chief economist of the NBS.
Yao's opinion, however, didn't win support from other economists. Song Guoqing, a professor with the China economic research center under the Peking University, deemed that heavy snows, starting to fall only since the later half of the month, were limited in impact on January's prices.
"The influence of the snow disaster may emerge in a longer term," said Song, predicting February's CPI might be driven up above eight percent.
Song attributed January's CPI hike mainly to a too rapid growth of money supply. Measures including raising interest rates and reserve requirement ratio by the central bank are still too weak to rein in the over-growing money supply since last July, he said.
"Interest rates climb up clumsily after the CPI rises, but the real interest rates are actually dropping," he said.
"Though the increase rate of China's trade surplus was slowing down, hot money kept flowing in," he said, adding the money pouring into bonds and stocks also grew rapidly, which he suggested should be taken into consideration when calculating the general money supply.
The central bank shall further tighten its monetary policies, put a brake on loans and accelerate the appreciation of the Renminbi, or Chinese yuan, he said.
Regulators hope to make Wall St. pay for its role in subprime crisis
BOSTON - REGULATORS are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players - but also may have tricked borrowers and investors who supplied cash to fuel a housing boom that has collapsed.
A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles.
Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.
Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.
Observers do not expect the financial penalties that regulators extract in the civil cases to be massive. But the cases could turn up evidence that forces Wall Street to defend itself amid growing talk of government help to ease subprime-related financial strains on bond insurers.
Revelations of bad behaviour Revelations of bad behaviour turned up by the government also could spur private investors to file even more lawsuits than the hundreds they’ve already brought to recover losses.
‘This could get a lot nastier, for many reasons,’ said Mr John Akula, a business law lecturer at the Massachusetts Institute of Technology’s Sloan School of Management. ‘Prolonged close scrutiny often turns up all kinds of dubious practices that in normal times are under the radar.
‘If the government sponsors any kind of bailout with public funds, this may be coupled with an aggressive prosecutorial agenda in support of efforts to get private parties to kick in.’
Although the foreclosure-blighted cities of Cleveland and Baltimore have sued seeking to recover damages from mortgage lenders, most of the cases filed so far are from regulators alleging violations of state securities laws.
Attorneys general in New York and Ohio are targeting alleged systematic inflation of home appraisals by major lenders and appraisal firms. Litigation in Massachusetts and other states seeks to demonstrate that investment banks failed to disclose risks to investors who bought mortgage-related securities and weren’t up front about conflicts of interest across their far-flung financial operations, including trading of subprime investments.
‘Over the years, the relationship between lender and borrower and a particular piece of property has been severed,’ said Massachusetts Secretary of State William Galvin. ‘It’s clear that it’s become a runaway train.’
Gone are the days when most borrowers simply got loans from the neighbourhood bank, which used to hold the bulk of mortgage risk. Now that risk is spread further - mortgages are bundled together and sold to investors. Behind the scenes, credit-rating agencies offer advice on whether the investments are secure.
Lenders are hurting
Until recently, cash from Wall Street banks and investors extended growing amounts of credit to low- and middle-income Americans enticed to enter a market when home prices appeared headed nowhere but up.
Lenders wrote US$625 billion (S$882 billion) in subprime mortgages in 2005, nearly four times the total in 2001. The boom brought in big fees to mortgage brokers, lenders, banks and ratings agencies.
But now that prices are dropping, those players are hurting. Global banks have ousted executives and have written off nearly US$150 billion since mortgage securities began collapsing last summer.
Given the losses, ‘It’s doubtful some of these entities will repeat their performance,’ Mr Galvin said. ‘But I think there needs to be an understanding of how we got where we are, whether that is through regulatory action, or through Congress.’
States have responded by tightening rules governing how lenders and brokers arrange mortgages and are compensated. But lawsuits and administrative complaints are the main tools regulators use to seek fines against companies accused of wrongdoing, or to set examples to deter bad behaviour.
‘What they can’t enforce through regulation, they will try to accomplish through suing,’ said Mr David Bizar, a Hartford, Conn.-based attorney with the firm McCarter & English who defends against subprime mortgage lawsuits brought by consumers and regulators.
Subprime-related cases increasing Already, the number of subprime-related cases filed in federal courts is outpacing the rate of litigation that emerged from the savings and loan meltdown in the late 1980s and early ‘90s, according to a study released on Thursday.
The 278 subprime cases filed in federal courts in 2007 already equals half of the total 559 S&L cases handled over multiple years, according to the findings from Navigant Consulting Inc.
Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI did not identify companies but said the probe involves firms across the financial services industry.
The FBI is working with the Securities and Exchange Commission, which has civil enforcement powers. The SEC said in January that it had about three dozen active investigations under way.
In the rush to sue big business, there is plenty of blame to go around in the subprime meltdown, said Mr Bizar, the lawyer who has represented lenders in subprime cases. Those include everyone from investors buying mortgage-related investments without understanding the risks, to credit-rating agencies that failed to alert investors to lenders’ precarious positions as mortgage delinquencies spiked.
But the mess can be blamed more on unrealistic expectations than fraud, he said.
‘You had a lot of people reaching to get into homes they couldn’t afford, on the theory that it would go up in value,’ Mr Bizar said. -- AP
Basic food prices in the UAE have rocketed by 36%, with basmati rice expected to increase by at least a further 70% a newspaper reported Thursday.
UAE daily Gulf news said an expected shortage in rice would send prices sky-high, with Pakistani rice suppliers threatening to reduce exports if prices are not increased to match Indian products.
The price of cooking oil has risen by 80%, Indian mutton by more than 100%, while cooking gas has increased by 30%, the newspaper said, adding that residents had been forced to shop for groceries in more affordable neighbouring countries.
Meanwhile, Saudi Arabia said it would withdraw subsidies from rice importers if prices continue to increase without good reason.
Dubai economist Eckart Woertz told Gulf News weak dollar-pegged Gulf currencies had made imports more expensive. “Food price inflation is a global phenomenon, but GCC countries are particularly affected …. if they revalue, food imports will become cheaper”, he said.
Elite China think-tank issues political reform blueprint
19 February 2008
BEIJING - CHINA risks dangerous instability unless it embraces democratic reforms to limit the power of the ruling Communist Party, foster competitive voting and rein in censors, the Party's top think-tank has warned in a new report.
The 'comprehensive political system reform plan' by scholars at the Central Party School in Beijing argues for steady liberalisation that its authors say can build a 'modern civil society' by 2020 and 'mature democracy and rule of law' in later decades.
The cost of delaying this course could be economic disarray and worsening corruption and public discontent, they write in Storming the Fortress: A Research Report on China's Political System Reform after the 17th Party Congress.
'Citizens' steadily rising democratic consciousness and the grave corruption among Party and government officials make it increasing urgent to press ahead with demands for political system reform,' the report states. 'The backwardness of the political system is affecting economic development.'
The report was finished in October, just after the Party's twice-a-decade congress ended and gave President Hu Jintao five more years as party chief. But it is only now appearing in some Beijing bookstores.
This is no manifesto for outright democracy. The authors say the Party must keep overall control and 'elite' decision-making will help China achieve lasting economic prosperity by pushing past obstacles to economic reform.
But the 366-page report give a strikingly detailed blueprint of how some elite advisers see political relaxation unfolding, with three phases of reform in the next 12 years, including restricting the Party's powers and expanding the rights of citizens, reporters, religious believers and lawmakers.
'Until now political reform has been scattered and inconsequential,' said Professor Wang Guixiu of the Party School not involved in the study. 'Real political reform needs a substantive plan of action, and there are some scholars and officials who believe that's what is needed now.'
The authors include Mr Zhou Tianyong and Mr Wang Changjiang, senior reform-minded scholars at the School, which trains officials for higher office. The report also has a preface by Mr Li Junru, a government adviser and vice-president of the Party School.
Unsettling social changes
The authors argue that government regulation of news is needed as China navigates unsettling social changes. But the present system of secretive and often arbitrary censorship is stoking corruption and public distrust of government, they said.
'Freedom of the press is an inevitable trend,' they said, calling for a law to protect reporters and 'effectively halt unconstitutional and unlawful interference in media activities'.
They also urge greater official respect for religion - a sensitive topic in China, where the atheist Party is wary of growing numbers of Christians, and unrest in Buddhist Tibet and the largely Muslim region of Xinjiang in the country's far west.
'Political faith and religious faith are not in contradiction,' the scholars said.
They propose that China's nearly 3,000-delegate national Parliament be slimmed down and given direct powers to set the budget and audit government spending.
Candidates for legislatures should be allowed to actively compete for votes, which is now banned, the authors said. And the Communist Party itself must bind itself under rule of law.
Communist Party chief Hu has promoted limited 'inner-Party democracy' to expose officials to more checks, but has shown no appetite for broad political liberalisation.
In a speech on Monday, Mr Hu said the Party had to be a 'staunch leadership core' that maintained 'flesh-and-blood bonds' with the people, Xinhua news agency reported.
But the Party School report, with its detailed arguments for change, and other books and essays from reformist advisers in the past year, suggest that some senior advisers have been thinking closely about much more ambitious reforms.
A recent survey of mid-ranking officials studying at the Party School indicated that growing numbers believe deeper political reform is needed.
In the survey of 154 officials conducted in late 2007, 55.5 per cent nominated the 'political system' as one of three areas of reform that most 'concerned' them, according to a study recently published by the Chinese Academy of Social Sciences.
In late 2005, 40 per cent of officials surveyed listed political reform as one of the areas. -- REUTERS
Prices for top-quality spring wheat have jumped by 90 per cent in the past month and a half, boosted by a scramble by corporate consumers to secure scarce grain and speculative buying by investors.
A surge on Friday in prices for wheat used in bread to an all-time high of $19.88 a bushel - the highest yet paid for any wheat contract and a three-fold increase from a year ago - prompted the US baking industry to call for wheat exports to be curtailed.
The American Bakers Association stopped short of asking for an export moratorium but pressed for curbs on foreign sales. Lee Sanders, ABA vice-president for government relations, said there was usually a surplus in the US wheat market equivalent to three months of US consumption. 'It is currently at a very low one-month level, which is extremely concerning,' she said.
Cereals traders said it was unlikely Washington would support export curtailments, but added that the call highlighted the tightness of the market.
The US is the world's largest wheat exporter. Faced with strong overseas demand after extreme weather damaged other countries' crops, its wheat stocks are set to fall to a 60-year low this year.
The shortage of top-quality spring wheat is forcing US millers to consider buying Canadian supplies.
Vance Taylor, the general manager at state-owned North Dakota Mill, said his company could buy Canadian wheat for the first time since 1922. 'Spring wheat is in very short supply in the US,' he said.
Supplies of lower quality soft wheat, used for baking biscuits and other products, are more plentiful, traders said.
In Chicago, soft wheat traded at about $10.25 a bushel. Rising food prices will be the focus this week of the US department of agriculture annual outlook conference, the main gathering of the industry.
Since last year's edition, food inflation has surged around the world. William Lapp, president of Advanced Economic Solutions, a Nebraska-based food consultancy, said that one of the key themes of this year conference would be the realisation that the price surge was not a temporary hump but rather a structural change. 'We are not facing a short-term price blip...but a sustained move to a new and higher plateau for prices,' he added.
By Richard McGregor in Beijing Mon Feb 18, 1:55 PM ET
China is expected to record a January inflation rate above 7 per cent when figures are announced on Tuesday - setting an 11-year high and providing evidence of entrenched inflationary pressures.
Widespread expectations of a significant jump in retail inflation were on Monday reinforced when producer prices hit a three-year monthly high of 6.1 per cent, mainly as a result of winter transport bottlenecks and higher commodity prices.
The threat of enduring inflation will add significantly to the pressures on Beijing to allow an even faster appreciation of its tightly managed currency.
The renminbi, which has risen by about 13 per cent against the US dollar since mid-2005, has been rising more rapidly recently, in-creasing at an annualised rate of about 19 per cent in January.
Inflation has mainly been driven by high food prices - a trend exacerbated by severe winter storms last month disrupting the transport of farm produce and coal. But rising ex-factory prices - as manufacturers pass on higher energy costs - are helping to spread inflation, say economists.
"Although the acceleration in inflation in China has been predominantly driven by food over the past year, the trends in [producer price] statistics suggest increasing inflationary pressure in the pipeline," said Qing Wang, the greater China chief economist for Morgan Stanley investment bank.
Jun Ma, of Deutsche Bank in Hong Kong, said in a note on Monday that inflation could reach as high as 8 per cent by March.
There are signs that the global inflationary pressures that have fuelled higher Chinese food prices, through the rising cost of pig feed, might now endure well into this year - creating a further headache for Chinese policymakers.
Prices for top-quality spring wheat have jumped by 90 per cent in the past six weeks on global markets, as corporate consumers have scrambled to secure supplies and speculators have bought stocks.
Beijing is constrained in the use of interest rates in fighting inflation because of the implications for the renminbi. US interest rates, which have been falling as the Federal Reserve battles the housing and financial crises, are now 200-250 basis points lower than comparable ones in China.
As a result, China's central bank is, technically, losing billions of dollars a month on the foreign exchange reserves it invests in US dollar instruments because it is paying higher rates at home on renminbi bank bills than it is getting in the US.
With interest rates on the back burner, a higher renminbi has become an important weapon for the government to fight inflation, by lowering import costs of oil and other commodities as well as soyabeans. Eighty per cent of soyabean imports are used for pig feed.
Although higher Chinese costs and currency appreciation will inflate its export prices, China is still importing inflation rather than exporting it at the moment, say economists.
"If anything, what is happening in the US is affecting China rather than the other way around," said one Beijing-based economist.
ZURICH - WHATEVER their political hue, no European government has dared let a bank go bust since the outbreak of the subprime crisis.
That appears to be one of the lessons after Britain decided at the weekend to nationalise ailing mortgage lender Northern Rock and Germany drew up plans for a fresh bailout of stricken bank IKB .
Two factors have weighed heavily on governments and regulators in Britain and Germany - the growing importance of financial services in a post-industrial economy and fear that a bank failure at the height of a global credit crisis could set off a cataclysmic chain reaction.
‘When push comes to shove governments will intervene and support banks in a very major way,’ said Simon Adamson at CreditSights in London. ‘Banks cannot be allowed to fail especially when markets are in a fragile state.’
The collapse of subprime mortgages set off a global credit crisis as banks around the world were forced to write down the value of their investments in complex securities whose value was wiped out as borrowers defaulted on their loans.
The credit crunch has hit banks in different ways, threatening IKB with collapse in July, as the value of its subprime investments wilted, and triggering the first run in 140 years on a British bank as customers besieged Northern Rock.
Switzerland’s UBS has been the biggest casualty among Europe’s global banks, taking more than US$18 billion (S$25.6 billion) in writedowns on its subprime exposures in 2007, but has been able to line up a capital injection from Singapore and the Middle East without seeking help from the authorities.
‘Although UBS’s writedowns dwarf those of other banks, it can absorb them. It was not in the desperate situation of the Germans or Northern Rock,’ said Mr Adamson.
Europe’s history of bank failures Northern Rock had no direct holdings of subprime investments but found its main source of funding - borrowing from other banks - had dried up when financial institutions shrank from lending to each other as the subprime crisis gathered pace.
Bank failures, even involving large lenders, are not unheard of in Europe but government-orchestrated bailouts have often ensured that depositors did not lose their savings.
Italy’s Banco Ambrosiano collapsed under a welter of bad debts in 1982 and was rescued by a consortium of Italian banks organised by the Bank of Italy. More than a decade later Banco Santander saved Banesto from failure in 1994 by taking the bank over at the request of the Spanish central bank.
British-based BCCI was wound up in 1991, but it did not have a large retail network in Britain. Media images of throngs of anxious customers trying to get their savings out of Northern Rock prompted the British government to guarantee deposits.
British merchant bank Barings was bought for a token sum by Dutch bank ING in 1995 after rogue trader Nick Leeson bankrupted the company, but it too had no retail customers.
Banks may have never been more prominent in Europe’s economies than they are now as industry recedes.
‘The interesting point here is the centrality of financial services in these countries. Just as in the 1970s when industrial companies were in crisis they got government support, we are now seeing that in the financial services sector,’ said Ian Harnett, a director at Absolute Strategy in London.
‘Financial services are much more central to the wellbeing of the economy overall,’ he added.
Jochen Sanio, head of Germany’s financial regulator BaFin, warned in July that IKB’s collapse could spark the country’s worst banking crisis in 75 years.
The inability to find a buyer either for Northern Rock or for IKB also left the authorities with no option but to step in.
‘In each case where it was not possible to find a private solution or an investor there was state aid, both in Britain and in Germany,’ said Andreas Weese, an analyst at UniCredit.
The richest irony of the subprime crisis in Europe, has been that Britain, a country that has embraced free markets with more enthusiasm than any Western European nation, should reluctantly have been forced to act in much the same way as Germany.
Fitch Ratings, the only ratings agency to assign ratings measuring the probability of government rescue if a bank gets into trouble, rated both IKB and SachsenLB, another German state bank bailed out in 2007, a 1 before the subprime crisis.
That is the highest ‘support rating’ on a scale of 5 to 1 measuring the probability of a state intervention in a crisis.
Northern Rock was only rated a 3.
‘In other circumstances it is conceivable that the British authorities could have let Northern Rock go (fail) but because the run happened in the context of a far broader problem it was not possible,’ said a ratings analyst who asked not to be identified. -- REUTERS
SHANGHAI, Feb 19 (Reuters) - Bank of East Asia (0023.HK: Quote, Profile, Research), Hong Kong’s fifth-largest lender by assets, expects growth of its lending in the mainland Chinese market to slow sharply this year, a senior executive of the bank said on Tuesday.
Growth is likely to slow to about 30 percent in 2008 from 70 percent in 2007 because of the government’s drive to restrict new lending in order to cool the economy, said Lam Chi Man, executive vice president of Bank of East Asia (China), the bank’s wholly owned China unit.
However, Lam also told Reuters that Bank of East Asia would continue to expand its China presence rapidly. He said it aimed to open about 25 new offices, including sub-branches, in the country this year and add around 1,000 new staff, compared to its current mainland China staff of about 2,700. (Reporting by George Chen; Editing by Andrew Torchia)
After China Ships Out iPhones, Smugglers Make It a Return Trip
By DAVID BARBOZA February 18, 2008
SHANGHAI — Factories here churn out iPhones that are exported to the United States and Europe. Then thousands of them are smuggled right back into China.
The strange journey of Apple’s popular iPhone, to nearly every corner of the world, shows what happens when the world’s hottest consumer product defies a company’s attempt to slowly introduce it in new markets.
The iPhone has been swept up in a frenzy of global smuggling and word-of-mouth marketing that leads friends to ask friends, “While you’re in the U.S., would you mind picking up an iPhone for me?”
These unofficial distribution networks help explain a mystery that analysts who follow Apple have been pondering: why is there a large gap between the number of iPhones that Apple says it sold last year, about 3.7 million, and the 2.3 million that are actually registered on the networks of its wireless partners in the United States and Europe?
The answer now seems clear. For months, tourists, small entrepreneurs and smugglers of electronic goods have been buying iPhones in the United States and then shipping them overseas.
There the phones’ digital locks are broken so they can work on local cellular networks, and they are outfitted with localized software, essentially undermining Apple’s effort to introduce the phone with exclusive partnership deals, similar to its primary partnership agreement with AT&T in the United States.
“There’s no question many of them are ending up abroad,” said Charles R. Wolf, an analyst who follows Apple for Needham & Company.
For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts.
But those economic realities do not play into the mind of Daniel Pan, a 22-year-old Web site designer in Shanghai who says a friend recently bought an iPhone for him in the United States.
He and other people here often pay $450 to $600 to get a phone that sells for $400 in the United States. But they are happy.
“This is even better than I thought it would be,” he said, toying with his iPhone at an upscale coffee shop. “This is definitely one of the great inventions of this century.”
Mr. Pan is among the new breed of young professionals in China who can afford to buy the latest gadgets and the coolest Western brands. IPhones are widely available at electronic stores in big cities, and many stores offer unlocking services for imported phones.
Chinese sellers of iPhones say they typically get the phones from suppliers who buy them in the United States, then have them shipped or brought to China by airline passengers.
Often, they say, the phones are given to members of Chinese tourist groups or Chinese airline flight attendants, who are typically paid a commission of about $30 for every phone they deliver.
Although unlocking the phone violates Apple’s purchase agreement, it does not appear to violate any laws here, though many stores may be avoiding import duties.
Considering China’s penchant for smuggling and counterfeiting high-quality goods, the huge number of iPhones being sold here is not surprising, particularly given the popularity of the Apple brand in China.
Indeed, within months of the release of the iPhone in the United States last June, iPhone knockoffs, or iClones as some have called them, were selling here for as little as $125. But most people opt for the real thing.
“A lot of people here want to get an iPhone,” says Conlyn Chan, 31, a lawyer who was born in Taiwan and now lives in Shanghai. “I know a guy who went back to the States and bought 20 iPhones. He even gave one to his driver.”
Negotiations between Apple and China Mobile, the world’s biggest mobile-phone service operator with more than 350 million subscribers, broke down last month, stalling the official release of the iPhone in China. Long before that, however, there was a thriving gray market.
“I love all of Apple’s products,” said a 27-year-old Beijing engineer named Chen Chen who found his iPhone through a bulletin board Web site. “I bought mine for $625 last October, and the seller helped me unlock it. Reading and sending Chinese messages is no problem.”
An iPhone purchased in Shanghai or Beijing typically costs about $555. To unlock the phone and add Chinese language software costs an additional $25.
For Apple, the sale of iPhones to people who ship them to China is a source of revenue. But the company is still losing out, because its exclusive deals with phone service providers bring in revenue after the phone is sold. If the phones were activated in the United States, Apple would receive as much as $120 a year per user from AT&T, analysts say.
But there are forces working against that. Programmers around the world collaborate on and share programs that unlock the iPhone, racing to put out new versions when Apple updates its defenses.
While Apple has not strongly condemned unlocking, it has warned consumers that this violates the purchase agreement and can cause problems with software updates.
Some analysts say abandoning the locked phone system and allowing buyers to sign up with any carrier they choose, in any country, could spur sales.
“The model is threatened,” Mr. Wolf, the analyst, said. But “if they sold the phone unlocked with no exclusive carrier, demand could be much higher.”
An Apple spokeswoman declined to comment on the proliferation of iPhones in China. When asked about the number of unlocked iPhones during a conference call with analysts last month, Timothy D. Cook, Apple’s chief operating officer, said it was “significant in the quarter, but we’re unsure how to reliably estimate the number.”
The copycat models are another possible threat to Apple. Not long after the iPhone was released, research and development teams in China were taking it apart, trying to copy or steal the design and software for use in knockoffs.
Some people who have used the clones say they are sophisticated and have many functions that mimic the iPhone.
In Shanghai, television advertisements market the Ai Feng, a phone with a name that sounds like iPhone but in Chinese translates roughly as the Crazy Love. That phone sells for about $125.
Some of the sellers of the copycats admit the phones are a scam.
“It’s a fake iPhone, but it looks nearly the same,” said a man who answered the phone last week at the Shenzhen Sunshine Trade Company, in southern China’s biggest electronics manufacturing area. “We manufacture it by ourselves. We have our own R. &D. group and manufacturing plant. Most of our products are for export.”
Most people here seem to want the glory that comes with showing off a real iPhone to friends.
“My friends envy me a lot,” says Mr. Pan, the Web designer. “They say, “Wow, you can get an iPhone.’ ”
Unsuccessful buyers urged to consider build-to-order flats
February 19, 2008
THE Housing and Development Board received 9,900 applications for 278 flats offered in its February bi-monthly sale.
Most of the units offered are four-room flats, plus 64 five-room units and 20 executive flats in 13 estates.
There are 119 units in Toa Payoh and 39 in Tampines.
HDB said the strong demand was 'because the flats offered are in established HDB towns which are popular with buyers, but the supply of new flats is tight as there is limited land available'.
HDB advised unsuccessful applicants to consider booking a flat under its build-to-order (BTO) scheme. About 4,500 flats will be launched under this scheme in the first half of the year.
More than 500 are still available from recent BTO launches at Punggol and Sengkang, such as Treelodge@Punggol, Fernvale Vista, Punggol Vista and Coral Spring.
HDB also suggested that buyers also consider resale flats, which it said still remain largely affordable. It said that in January, 25 per cent of resale transactions were completed at prices no more than $10,000 above valuation.
The recently closed sale is HDB's fifth bi-monthly sale exercise for four-room and larger flats in the combined balloting/walk-in system. HDB is currently reviewing the scheme.
Maybank's home loan rate cut sets cat among pigeons
Analysts divided on whether this will signal undercutting among the banks
By CHOW PENN NEE February 19, 2008
(SINGAPORE) Maybank has fired a salvo that could shake up the home loan market here by slashing its rates. This has led to speculation that banks might start to undercut each other to drum up business. Meanwhile, the banks themselves are adopting a cautious stance in a falling interest rate environment that could change direction.
For a three-week period, Maybank is launching a promotional three-year fixed rate home loan package which is the lowest of all the banks surveyed.
Home-owners pay 1.68 per cent per annum for the first year, 2.68 per cent pa for second year and 3.38 per cent pa for the third year. The rates apply to both HDB and private home loans. Homeowners are subject to a three-year lock-in period and fees will apply in case of early redemption, prepayment and cancellation during that time.
Before this promotion, the Qualifying Full Bank's rates stood at 3.58 per cent pa for all three years. Maybank's new first-year interest rate is about 40 per cent lower than similar packages being offered in the market (see table). But it has a lock-in period of three years while other banks generally have a two-year lock-in.
Helen Neo, head, consumer banking, Maybank Singapore, explained that interbank rates have softened over the past few months. 'However, we expect interest rates to rebound in view of rising inflation in Singapore,' she said. 'Against a backdrop of potential rising interest rates, home loan customers who take up this fixed rate package will enjoy the prevailing low rates and are protected from future interest rate increases for the next three years.'
Mortgage rates are affected by the Singapore interbank offer rate (Sibor) - the rate at which banks lend to one another. Sibor has been on a downward trajectory since late last year, after hovering around 2.5 per cent.
Yesterday, the three-month Sibor fell to 1.44 per cent, its lowest level since December 2004. Economists say it is expected to go even lower by mid-year, partly due to the US steadily cutting its key interest rate. Sibor takes its cue from interest rates in the US, and last month the US Federal Reserve slashed its key interest rate from 4.25 per cent to 3.5 per cent, and then to 3 per cent.
Maybank's move to reduce rates is prompting speculation among mortgage consultants that banks could follow suit with foreign banks leading the way. 'I'm not surprised that this round of interest rate reductions is led by foreign banks again,' said Dennis Ng, spokesman for Mortgage Consultancy Portal www.HousingLoanSG. com. 'From past experience, local banks have typically lagged behind foreign banks in adjusting interest rates down.' This is because the three local banks have the lion's share of the housing loan market. 'If they reduce interest rates, they have more to lose,' said Mr Ng. While cutting rates would let them gain some more business, the advantage would be neutralised if their existing clients start paying lower rates.
But with Sibor falling, other banks could follow suit in lowering their interest rates, Mr Ng said. The last time banks were seen aggressively undercutting each other on rates was in 2003-2004, where foreign banks actively led the charge in introducing lower rates.
Leong Sze Hian, president of the Society of Financial Service Professionals, agreed that banks would be nudged into lowering their rates. 'Sibor rates are dropping and once Maybank lowers its rates, everyone will follow, otherwise customers will move,' he said.
However, consultants like Tang Yin Fong, a mortgage advisor at wealth and investment outfit Providend, said local banks already have Sibor-linked packages which track the movement of Sibor, and do not need to lower rates to be competitive.
'Such packages have been relatively attractive in the current lowered Sibor environment and have since been the main packages that the banks recommend to homeowners,' she explained.
She also added that in the current situation where the Singapore property market still seems to be on the rise and more homeowners are seeking mortgage loans, banks may be less willing to lower their interest rates.
Meanwhile, DBS Bank said it has 'no plans to adjust rates' for now, while OCBC and United Overseas Bank both said they would monitor the situation before making a decision.
Foreign banks Citibank and Standard Chartered shied away from saying if they will review rates but pointed to their Sibor packages, which they say give customers control in repricing loan packages. Stuart Kamp, head of mortgages, Standard Chartered Bank, added, 'We expect interest rates to trend down over the coming months.'
BUDGET 2008: Analysts see pay-offs only in the longer-term
R&D carrot may be ideal diet for some outfits
Estate duty abolition may also help banks and push up property prices
By UMA SHANKARI February 19, 2008
(SINGAPORE) It was a Budget that failed to excite the stock market very much, but analysts said that some of the initiatives announced could benefit research-intensive firms and companies in the healthcare, technology, finance and property sectors - mostly in the longer term.
Shrugging off Friday's Budget announcement, the benchmark Straits Times Index fell 5.34 points - or 0.2 per cent - to close at 3,083.3 points yesterday.
As UOB Kay Hian predicted at the start of the day: 'Concerns over a slower earnings growth and higher inflation will limit any euphoric market rally.'
But contrary to what was suggested by the market, some listed companies here will be better off due to the Budget, analysts said. Singapore's bid to move up the R&D value chain could perhaps have the most impact, the analysts added.
OCBC Investment Research said that Biosensors International, LMA NV and ST Engineering could benefit as Singapore increases its yearly R&D spending to $7.5 billion, or 3 per cent of GDP, by 2010.
The firm also said that Venture Corporation and Chartered Semiconductor - both of which spent a substantial proportion of their operating expenses in R&D - stand to benefit in particular as the R&D tax deduction is increased from 100 per cent to 150 per cent and an R&D tax allowance of up to 50 per cent of the first $300,000 of taxable income is given.
'Both Venture Corporation and Chartered Semiconductor spent a substantial proportion of their operating expenses in R&D,' OCBC's research unit said in a note yesterday. 'Venture spent about $29.6 million on R&D in FY07, while Chartered spent about $159.8 million. We can expect both companies to see significant tax reductions in the coming years.'
UOB Kay Hian similarly identified Creative Technology, Venture Corp and Biosensors as listed companies that could gain from the R&D push.
Also expected to have a major impact is the abolition of estate duty, which analysts said could boost Singapore's competitiveness as the region's wealth management hub and attract more foreign investment.
'We think the removal of estate duty is good news for the Singapore property market, as real estate is a natural choice for some of this money to be invested, especially with high inflation and negative real returns,' said Lehman Brothers in a note yesterday.
The research firm noted that property prices generally gain in the 12 months following the removal of estate duty. The note said: 'Malaysia abolished the estate duty in late 1991 and home prices rose 12 per cent on average in the ensuing 12 months. More recently, Hong Kong abolished the estate duty in early 2006 and property prices were up 6 per cent on average in the following 12 months. We think this could be more than coincidence.'
UOB Kay Hian, on the other hand, said that the clearest beneficiaries from the removal of estate duty would be financial institutions. The firm reiterated its 'buy' calls on DBS, OCBC and Hong Leong Finance in view of this.
UOB Kay Hian also said that listed medical plays such as Raffles Medical Group and Parkway Holdings will benefit from the government's commitment to implementing means testing - which allows for a gradual shift of high-income patients from government hospitals to private hospitals.
However, there is a consensus among analysts that any boost from this Budget is expected to kick in only in the longer term.
'The business-related Budget initiatives are part of the government's ongoing efforts to transform the Singapore economy into a knowledge-based economy and grow the services sector, in our view,' Deutsche Bank summed up in a note. 'While positive in the long term, these moves are unlikely to have a tangible impact in the near term.'
S'pore c.bank: challenge to stop credit crisis spiral
By Jan Dahinten
SINGAPORE, Feb 19 (Reuters) - Singapore's central bank on Tuesday warned that the global credit crisis may spread and said the main challenge was to stop it from bleeding the real economy.
"At this point there is a risk of being caught in a negative spiral. Tightening credit standards and reduced credit availability will be mutually reinforcing with the slowing of the macro economy," Heng Swee Keat, managing director of the Monetary Authority of Singapore, said in a speech.
"The immediate challenge for policy makers is to contain the spread of the credit crisis to the real economy, to prevent this spiral," he said at the IMAS investment conference.
Heng said that limiting the scope of the crisis was difficult as the level of exposure to risky debt was unclear, and because central bankers faced different degrees of slowing growth and inflationary pressures in their economies.
"This time last year, the global economic outlook was positive. Today, it has become a lot more uncertain."
Swiss bank Credit Suisse became the latest casualty of the credit crisis on Tuesday, when said it wrote $2.85 billion off the value of its asset-backed investments and found mismarking and pricing errors on its books, sending its shares plummeting.
Heng said that while only a few investment funds had experienced withdrawals of funds but that this could change if markets carried on falling.
"If asset prices continue to decline, investors may react differently. This is a risk we need to watch.
"In this state of flux, central banks and financial regulators need to be on heightened alert and respond decisively to developments that might further threaten global growth or financial stability."
HONG KONG - Australia has become the first country to react to mounting public concerns over the growing clout of overseas sovereign wealth funds, unveiling a set of screening criteria that will be used by Australian regulators in determining whether to allow investment made by these funds.
Intriguingly, the list of six overarching principles was released Sunday by Australian Treasurer Wayne Swan just days before the Foreign Investment Review Board is set to deliberate on a 16.5 billion Australian dollar ($15 billion) investment in Rio Tinto by the Chinese government-owned company Chinalco in partnership with the U.S. aluminum giant Alcoa.
Prime Minister Kevin Rudd also weighed in a day later, saying foreign state-owned wealth funds will face close scrutiny. In an interview on Monday with the Australian Broadcasting Corporation, Rudd stressed he wasn't specifically commenting on a particular company, but later stated his intention to hold talks with Chinese leadership about their long-term strategy and Australia’s strategic interests.
In announcing its six principles, Australia became the first country to try to make its screening process for regulating investments by foreign sovereign wealth funds more transparent and predictable.
In the United States, growing anxiety over the rising influences of sovereign wealth funds has led to a heated debate over national security implications and prompted the International Monetary Fund to start work on a code of conduct for sovereign wealth funds at the behest of G-7 nations.
Australian media interpreted the move by its Treasury as a way to avoid future diplomatic hiccups should it veto any investments.
Swan pointed out in an interview with the state broadcaster ABC News Radio that, “the judgment that I will make as a treasurer on a case by case basis is whether they are operating commercially and whether they are, in particular, in the national interest. So we put down six principles-- principles that we will use to judge these on a case by case basis.”
According to an official statement issued by the Treasury, chief among the six guidelines is whether the entities making the investment “are independent from the relevant foreign government,” including such issues as the extent to which it operates at arm’s length from their government, whether it is controlled by a foreign government, including funding arrangements.
Second is whether it follows common standards of business behavior showing clear commercial objectives and good corporate governance practices.
Third is impact on competition: would the investment lead to undue concentration or control in the industry or sectors affected?
The remaining items on the checklist include whether the investment would impact Australian tax revenue or government policies, whether it would have a national security impact, and lastly, the impact on the target business’ operations and direction and its contribution to the Australian economy and broader community.
Melbourne Business School professor Paul Kerin told The Australian newspaper the guidelines were an improvement from the current regime, under which an investment could be vetoed due to domestic political lobbies such as threatened boards and unions. However, he said transparency would be enhanced further if the treasurer were also required to provide a detailed explanation for any veto, including releasing the Foreign Investment Review Board's full recommendation, to avoid the new criteria being held hostage by other xenophobia motivations.
Australia has long been a destination of choice for the Singaporean sovereign wealth funds Temasek and the Government of Investment Corporation. Temasek’s SingTel bought the telecom company Optus in 2001 and its affiliated SingPower won control of Victoria state electricity assets in 2004. Collectively, they own assets in Australia worth more than 20 billion Australian dollars ($18.39 billion), according to The Australian. By comparison, the Australian government has approved Chinese investments totaling nearly 5 billion Australian dollars ($4.6 billion) in the past 12 months, the paper said.
In recent months, China’s State Administration of Foreign Exchange has quietly bought stakes in National Australia Bank, Australia and New Zealand Banking Group and Commonwealth Bank of Australia.
Bond Insurer Split May Trigger Lawsuits, Analysts Say
By Cecile Gutscher
Feb. 18 (Bloomberg) -- Regulators' plans to break up bond insurers into ``good'' businesses covering municipal debt and ``bad'' businesses liable to subprime-related losses may trigger ``years of litigation,'' Bank of America Corp. analysts said.
New York Insurance Department Superintendent Eric Dinallo and New York Governor Eliot Spitzer said last week that insurers may need to be divided if they can't raise enough capital to compensate for losses on subprime-mortgage guarantees. FGIC Corp., the fourth-largest of the so-called monoline insurers, asked to be split on Feb. 15 after Moody's Investors Service cut the Stamford, Connecticut-based company's top Aaa ranking.
``It is the equivalent of going to a casino and trying to keep only the winning bets,'' said Tim Mercer, chief investment officer at Hong Kong-based hedge fund Musashi Capital Ltd. ``This would be a straightforward case of fraudulent conveyance and everyone involved would be liable for damages from deprived creditors.''
FGIC, owned by Blackstone Group LP and PMI Group Inc., insures about $314 billion of debt, including $220 billion in municipal bonds. The company said last week it applied for a license from New York state insurance regulators to create a standalone municipal company and separate the unit that guarantees subprime-mortgage bonds and related securities that led to rating downgrades.
New York-based Ambac Financial Group Inc., the second- largest bond insurer, may also seek a split, the Wall Street Journal reported today, citing a person familiar with the situation.
`Legal Challenges'
``Despite the regulatory interest in separating the exposures, the essential fact remains that all policy holders, whether municipal or structured finance, entered into contracts backed by the entire entity,'' analysts led by Jeffrey Rosenberg in New York wrote in a note to investors dated Feb. 15. A breakup is ``likely to lead to significant legal challenges holding up the resolution of the monoline issues for years.''
Investors in credit-default swaps based on the bond insurers may also seek damages to compensate for losses, according to the research note.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
`Deeply Distressed'
The cost of credit-default swaps on Armonk, New York-based MBIA Inc., the world's largest bond insurer, has soared to $1.7 million upfront and $500,000 a year to protect $10 million of bonds from default for five years, according to CMA Datavision. Ambac credit-default swaps were at the same level as MBIA at the close of trading in New York on Feb. 15. The contracts, which cost $25,000 a year ago, trade upfront when investors see a risk of imminent default.
Any breakup of the companies may cause ``significant widening'' in the credit-default swaps as the structured finance company is likely to be ``deeply distressed,'' the Bank of America report said.
``The authorities' encouragement of such a solution reveals their fundamental misunderstanding of basic commercial law and principles and also their sense of desperation,'' said Musashi Capital's Mercer.
Postbank up pre-bourse as HSBC and RBS reportedly eyeing buying bank
FRANKFURT, Feb 19, 2008 -- Shares in Deutsche Postbank AG were higher in pre-bourse deals after a report in the Westdeutsche Allgemeine Zeitung said that Royal Bank of Scotland and HSBC Holdings have indicated they would be interested in buying the bank, churning up M&A speculation that has followed the bank for weeks.
At 8.30 am, shares in Postbank were 0.31 pct higher at 62.38 in pre-bourse electronic trade, up from yesterday's close at 62.18.
"It is really no surprise that foreign banks may also be interested in Deutsche Postbank, but the German government said yesterday that it favours a national solution," said a Frankfurt-based trader.
"Nevertheless [the news is] positive, as it lifts a possible auction price," he added.
"Deutsche Post AG, which owns 50.0 pct plus one share [in Postbank], is expected to decide on a disposal by the end of this year," said another trader.
"There is ample time to speculate, which bank or other institution is going to acquire Postbank and considering the management changes at Deutsche Post, a decision might even be delayed as other topics prevail. After its mail carrier unit, financial services are second best earnings performer in Deutsche Post's business mix," the trader explained.
HSBC and Royal Bank of Scotland have signalled their interested in acquiring Deutsche Postbank AG, daily Westdeutsche Allgemeine reported.
In addition, a Dutch bank is also interested in Postbank, the paper said, citing sources in Deutsche Post's supervisory board.
Commerzbank AG and Deutsche Bank AG have already declared their their interest in taking over Postbank.
A report in yesterday's Handelsblatt also said that the German government wants Deutsche Post to sell its stake, with Commmerzbank as its preferred buyer.
Deutsche Post replaced its chief executive Zumwinkel with former management board member Frank Appel yesterday. Zumwinkel offered to resign on Friday after his private house and offices were raided as part of a 1 mln eur tax fraud charge.
The sleaze behind the sleaze of Hong Kong’s sex photos
Maybe there’s more to Edison Chen’s troubles than theft by a computer technician
17 February 2008
Don’t expect Hong Kong’s overheated media to give a full account of the so-called Internet sex photos scandal, despite the fact that local newspapers have been repairing their balance sheets with it for weeks and giving the public a liberal daily lacing of all the titillation fit to print.
The real scandal is not the perfectly normal, if somewhat energetic, sexual activities of singer Edison Chen and his various singer/actress girlfriends. There could even be more to come, but who in Hong Kong truly believes that “innocent looking” girls in their early 20s in the entertainment business (or anywhere outside a convent) are virgins? If they were it would be a man-bites-dog story.
The real scandal likely cannot be told because it lies buried in the obscure but crucial relationships between Hong Kong’s entertainment industry, organized crime, the government and police. This was the very police force that started arresting a few Internet users who had passed on the sexy pix to their friends despite the fact that the photos had not been ruled obscene. Subsequently the relevant Hong Kong panel ruled the pictures indecent rather than obscene.
Anyway, by then the photos had been on-passed to Web sites around the world – not just Chinese language ones ‑ and kicked off a stunning brouhaha. Major Chinese newspapers increased their press runs by 30 percent to handle street sales from the story. It is likely that at least a million people in Hong Kong alone have seen some of the raunchier ones in full anatomical detail. Millions more have seen the printed version, genitalia obscured, which have been published in feverish local magazines and newspapers.
In an Internet world rife with pornography and nudity, the Hong Kong officials’ decision to raid the computer shop that repaired (and apparently looted) Chen’s laptop was unusual. Nine people were arrested, with Hong Kong’s Commissioner of Police, Tang King-shing, warning sternly that mere possession of the photos would violate the territory’s Colonial-era obscenity law. One man was detained for days without bail but was eventually released.
The police and the government in general may have rushed to make this an important issue because one of the indirect victims was Albert Yeung, head of the Emperor Entertainment Group, whose family hails from the tough Chiu Chow region of southern China. The female Cantopop stars’ sex exploits exposed by Edison Chen’s photos were all members of Yeung’s stable of entertainers. One of them, Vincy Yeung, was his niece, a daughter of his brother.
According to official reports, the photos became public because they were downloaded by a computer technician who had been given Chen’s pink Apple laptop computer to repair. The technician then gradually released them to the Internet. However, though this story may hold water in some respects, it looks unlikely to be the whole truth. It certainly does not fully explain why the photos surfaced when they did, or why new photos continue to make their appearance. This suggests that someone other than the technician has control of the smut cache, which according to some reports is said to run to hundred of stills and video clips and to involve 10 or so girls.
Yeung himself is a well-known business figure long said – and of course denied – to have or have had connections to the Sun Yee On triad, a criminal organization of long repute with activities in Hong Kong, China and beyond. He has had several brushes with the law. In 1981 he was jailed for attempting to pervert the course of justice and in 1995 was cleared of criminal intimidation and false imprisonment after all five prosecution witnesses suffered sudden memory lapses when called to testify.
Triad activity has long been known to be rife in the film and entertainment business in Hong Kong and the Cantopop industry is among its most profitable aspects. Although Yeung has many other business interests, ranging from a casino in Pyongyang to hotels and jewelry stores in Hong Kong, he is best known for his role in the entertainment industry and even into his 60s is noted in the gossip columns for his attraction to budding female performers.
The media frenzy over the sex photos may even help others in the industry, particularly the magazines and newspapers which have seen their circulations soar. However the careers of Emperor’s leading starlets are likely to suffer dramatically, unless they shift to the porn industry. Unlike in the west, where filmed Internet sex has caused barely a hiccup in the careers of Pamela Anderson, Britney Speers, Paris Hilton and others, in Hong Kong this kind of thing is not taken lightly. Edison Chen himself, who has appeared in 25 Hong Kong movies since 2000 including the immensely popular Infernal Affairs trio, is said to be prudently staying in North America because relatives of the singer’s many actress-girlfriends may have powerful relatives who wish to do him harm when he returns.
It also just happens that the photo frenzy coincided with the stock market listing of another part of Yeung’s empire, New Media Group Holdings which publishes five weekly titles. Despite the generally depressed market, New Media was 48 times oversubscribed and doubled in price when trading began.
Yeung’s lesser known rival in the media business is the China Star group run by Charles Heung Wah-keung, also of Chiu Chow origin. Heung is a son of the reputed founder of Sun Yee On and was himself identified as an office bearer of the triad in a report on organized crime to the US Senate.
Internet blogs such as asianfanatics.net are full of all kinds of theories relating to the photos, with suggestions of extortion and other criminal activities more serious than pornography, theft of data or invasion of privacy. They draw heavily on the background and past records of various players.
Also noteworthy could be Albert Yeung’s strong links to Chinese Communist Party figures who have the ear of the Hong Kong government which, for whatever reasons, prefers to ignore his brushes with the law and regard him as a useful and patriotic businessman.
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Thousands of Hong Kong factories in China may close
HONG KONG (AFP) — Up to 14,000 Hong Kong-owned factories in southern China may close in the next few months, in part due to the crippling winter weather that hit the nation earlier in February, a report said Monday.
Labour and power shortages in the aftermath of the heavy snowstorms will hurt operations, Clement Chen, chairman of the Federation of Hong Kong Industries (FHKI), told The Standard newspaper.
China’s worst winter in 50 years paralysed transport networks, leaving hundreds of thousands of migrant workers from the north stranded in the Pearl River Delta ahead of the Lunar New Year.
Many of the workers returned home late for the country’s biggest holiday, and Chen estimated more than 30 percent of them may still not have gotten back when factories re-opened on Monday.
About 70,000 factories employing 9.6 million people in the booming manufacturing delta area are run by Hong Kong businessmen -- 70 percent of the total number of factories there.
But Chen said some 14,000 Hong Kong-owned factories there will close this year, citing factors such as rising wages, increasing costs of raw materials and oil, a strengthening yuan and the economic slowdown in the United States.
“The snowstorms have merely worsened the situation,” he told the newspaper.
Another factor: migrant workers may opt to stay in their villages since salaries were no longer as far behind those in southern Guangdong province, where many factories are located.
“According to our experience, only 70 out of every 100 workers will come back to work after the New Year holiday,” Chen said.
US banks ‘quietly’ borrow S$71b from Fed: FT
NEW YORK - BANKS in the United States have been quietly borrowing ‘massive amounts’ from the US Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.
The newspaper said the use of the Fed’s Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly US$50 billion (S$71 billion) of one-month funds from the Fed by mid-February.
The Financial Times said the move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks’ growing reliance on indirect forms of government support. -- REUTERS
Northern Rock's rescue is part of a geopolitical sea change
This is no blip. The global economic crisis will burst the bubble of free-market doctrine and force states to take a more active role
Martin Jacques
February 18 2008
The world is holding its breath, still trying to grasp the potential enormity of what is unfolding. Economic downturns and stock market crashes are hardly unfamiliar, of course, even if a decade or so seems a long time ago for western consumers habituated to rising house prices and non-stop shopping. But this crisis threatens to be rather different, a Big One. Already it has forced the government to engage in what has been a heresy for almost three decades: nationalisation. Major crises such as the Northern Rock debacle are not matters of punctuation or pauses for reflection, but defining historical moments, marking the end of one era and the beginning of another. The 1970s was a classic case, as huge oil price hikes fed an inflationary spiral that brought both the long boom and the postwar welfare consensus to an end, and led to the rise of neoliberalism and deregulation.
This crisis, however, threatens to be even more fundamental. While the 1973 gyrations were the result of a temporary shift of power from the industrial world to Opec, the underlying cause this time is permanent and far-reaching - a fundamental shift in power from the developed world to the developing world, and above all China and India. We have not witnessed anything like this since the inception of the west as an industrial powerhouse in the 19th century.
The economic and political consequences will be of such a scale that they are impossible to comprehend. The present crisis has been long in the making, even if it has been obscured by the US spending over a decade in denial, as illustrated by the absurd post-9/11 neoconservative hubris about America becoming a latter-day Rome and the failure to address the growing imbalances between the US as a huge over-spender and East Asia as a massive saver.
There are two conclusions that we can draw from the economic crisis that began last August and might, in some form or another, last for a prolonged period. First, it heralds a major reduction in the global economic and political influence of the US, rather in the manner that the 1931 crisis announced the final and belated end of Britain's global economic supremacy. Fundamental systemic crises are often associated with the decline of the dominant imperial power and its increasing inability to sustain the system over which it had previously presided. The profound instability of the interwar period owed much to Britain's inability to maintain its role.
The present crisis, at root, is a consequence of the economic decline of the US and its increasing weakness at the apex of an international financial system of which it was the architect and chief beneficiary. This is most clearly expressed in the US's chronic balance of payments deficit and its long-term dependence on East Asian inward capital flows to shore up the value of the dollar. Perhaps the present turmoil will ease, but in truth the old arrangements are now coming apart and, in anything other than the short term, seem patently unsustainable. We are entering a period of protracted instability as the old order breaks down, the US seeks to resist change and the world embarks on a conflictual and painful passage towards a new global economic order.
The second conclusion is that the political consequences of this shift will be enormous. The interwar crisis led to the second world war and the birth of Keynesianism. The less significant Opec crisis of the 1970s destroyed the social-democratic consensus and led to the triumph of neoliberalism. And this time? One thing seems certain: the neoliberal orthodoxy will be undermined. This could come in many different forms. It could lead to a rise of protectionism in the US and Europe against developing countries such as China, or new regulations designed to prevent sovereign wealth funds from taking over what are deemed key strategic assets.
When the free market and deregulation are the means by which the western world extends its global economic power over the developing world, then they are deemed highly virtuous, but it is a different matter when they become the instrument by which developing countries can extend their influence over western economies. Similarly, during a recession the state is likely to be called into active service on a far more regular basis as western governments seek to deal with the mushrooming effects of market failure. It is not an accident that developing countries - virtually the whole of East Asia, for example - view the role of the state in a far more interventionist way than does the Anglo-Saxon world. Laissez-faire and free markets are the favoured means of the powerful and privileged. The decline of the western world could well usher in a significant change in this mind-set.
How will our own political elite respond to these changes? At best, very belatedly. Thatcherism, after all, was native to this country, a response to the 1970s crisis, and it has subsequently shaped the outlook of the governing elite to a greater extent than anywhere else apart from the US. To this day that elite remains shackled by its logic and assumptions. A classic illustration of this has been the timidity and cowardice of the government in the face of Northern Rock - the first domestic political challenge of the new global crisis. The Tories engaged in a similar knee-jerk response: the only voice of reason was provided by then acting Liberal Democrat leader Vincent Cable, who rose above the prevailing fear and prejudice, and had the courage from the outset to think outside of the ideological box. Finally, the government now seems to have come round to his view.
The political terrain is shifting. Attitudes towards the US are a case in point. The move towards neoliberalism in Britain was intimately bound up with the embrace of the US as the country to be aped and copied. The American model was celebrated by Thatcherites and New Labour alike, California worshipped as the model of the future, "Anglo-Saxon" embalmed as the fitting metaphor for the shared Anglo-American legacy, Europe denigrated and the rest of the world ignored. How perceptions of the US have changed: a country living beyond its means, dependent on large helpings of Asian credit, characterised by huge inequalities, its great financial institutions guilty of huge folly, forced to rely for their salvation on the sovereign wealth funds of China and elsewhere. And, remember, we are only at the very beginning of the biggest geopolitical shift since the dawn of the industrial era.
China's CPI hits new high of 7.1%
BEIJING, Feb. 19 (Xinhua) -- China's consumer price index (CPI), the main gauge of inflation, broke a decade-record to hit 7.1 percent in January, which experts believe will lead to further resolute tightening measures by the government.
The January's figure was the highest monthly level since 1997. The previous record was pinned at 7.0 percent in December of 1996.
The 7.1-percent rise was as expected by most market analysts, but slightly lower than the prediction of China's major state-owned bank. The Bank of China forecast the CPI for January would jump 7.5 percent or higher.
The bureau said food prices ballooned 18.2 percent in January from a year earlier, grain prices rose 5.7 percent and cooking oil prices increased by 37.1 percent.
Pork prices, which had been blamed as the major factor driving up CPI figures throughout the later half of last year, soared 58.8percent in January, the bureau said.
"The CPI was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country's areas and food price hikes during the Spring Festival," said Yao Jingyuan, the chief economist of the NBS.
Yao's opinion, however, didn't win support from other economists. Song Guoqing, a professor with the China economic research center under the Peking University, deemed that heavy snows, starting to fall only since the later half of the month, were limited in impact on January's prices.
"The influence of the snow disaster may emerge in a longer term," said Song, predicting February's CPI might be driven up above eight percent.
Song attributed January's CPI hike mainly to a too rapid growth of money supply. Measures including raising interest rates and reserve requirement ratio by the central bank are still too weak to rein in the over-growing money supply since last July, he said.
"Interest rates climb up clumsily after the CPI rises, but the real interest rates are actually dropping," he said.
"Though the increase rate of China's trade surplus was slowing down, hot money kept flowing in," he said, adding the money pouring into bonds and stocks also grew rapidly, which he suggested should be taken into consideration when calculating the general money supply.
The central bank shall further tighten its monetary policies, put a brake on loans and accelerate the appreciation of the Renminbi, or Chinese yuan, he said.
好久不见 - 陈奕迅
我来到你的城市
走过你来时的路
想像着没我的日子
你是怎样的孤独
拿着你给的照片
熟悉的那一条街
只是没了你的画面
我们回不到那天
你会不会忽然的出现
在街角的咖啡店
我会带着笑脸挥手寒喧
和你坐着聊聊天
我多么想和你见一面
看看你最近改变
不再去说从前只是寒喧
对你说一句只是说一句
好久不见
拿着你给的照片
熟悉的那一条街
只是没了你的画面
我们回不到那天
你会不会忽然的出现
在街角的咖啡店
我会带着笑脸挥手寒喧
和你坐着聊聊天
我多么想和你见一面
看看你最近改变
不再去说从前只是寒喧
对你说一句只是说一句
好久不见
Regulators hope to make Wall St. pay for its role in subprime crisis
BOSTON - REGULATORS are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players - but also may have tricked borrowers and investors who supplied cash to fuel a housing boom that has collapsed.
A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles.
Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.
Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.
Observers do not expect the financial penalties that regulators extract in the civil cases to be massive. But the cases could turn up evidence that forces Wall Street to defend itself amid growing talk of government help to ease subprime-related financial strains on bond insurers.
Revelations of bad behaviour
Revelations of bad behaviour turned up by the government also could spur private investors to file even more lawsuits than the hundreds they’ve already brought to recover losses.
‘This could get a lot nastier, for many reasons,’ said Mr John Akula, a business law lecturer at the Massachusetts Institute of Technology’s Sloan School of Management. ‘Prolonged close scrutiny often turns up all kinds of dubious practices that in normal times are under the radar.
‘If the government sponsors any kind of bailout with public funds, this may be coupled with an aggressive prosecutorial agenda in support of efforts to get private parties to kick in.’
Although the foreclosure-blighted cities of Cleveland and Baltimore have sued seeking to recover damages from mortgage lenders, most of the cases filed so far are from regulators alleging violations of state securities laws.
Attorneys general in New York and Ohio are targeting alleged systematic inflation of home appraisals by major lenders and appraisal firms. Litigation in Massachusetts and other states seeks to demonstrate that investment banks failed to disclose risks to investors who bought mortgage-related securities and weren’t up front about conflicts of interest across their far-flung financial operations, including trading of subprime investments.
‘Over the years, the relationship between lender and borrower and a particular piece of property has been severed,’ said Massachusetts Secretary of State William Galvin. ‘It’s clear that it’s become a runaway train.’
Gone are the days when most borrowers simply got loans from the neighbourhood bank, which used to hold the bulk of mortgage risk. Now that risk is spread further - mortgages are bundled together and sold to investors. Behind the scenes, credit-rating agencies offer advice on whether the investments are secure.
Lenders are hurting
Until recently, cash from Wall Street banks and investors extended growing amounts of credit to low- and middle-income Americans enticed to enter a market when home prices appeared headed nowhere but up.
Lenders wrote US$625 billion (S$882 billion) in subprime mortgages in 2005, nearly four times the total in 2001. The boom brought in big fees to mortgage brokers, lenders, banks and ratings agencies.
But now that prices are dropping, those players are hurting. Global banks have ousted executives and have written off nearly US$150 billion since mortgage securities began collapsing last summer.
Given the losses, ‘It’s doubtful some of these entities will repeat their performance,’ Mr Galvin said. ‘But I think there needs to be an understanding of how we got where we are, whether that is through regulatory action, or through Congress.’
States have responded by tightening rules governing how lenders and brokers arrange mortgages and are compensated. But lawsuits and administrative complaints are the main tools regulators use to seek fines against companies accused of wrongdoing, or to set examples to deter bad behaviour.
‘What they can’t enforce through regulation, they will try to accomplish through suing,’ said Mr David Bizar, a Hartford, Conn.-based attorney with the firm McCarter & English who defends against subprime mortgage lawsuits brought by consumers and regulators.
Subprime-related cases increasing
Already, the number of subprime-related cases filed in federal courts is outpacing the rate of litigation that emerged from the savings and loan meltdown in the late 1980s and early ‘90s, according to a study released on Thursday.
The 278 subprime cases filed in federal courts in 2007 already equals half of the total 559 S&L cases handled over multiple years, according to the findings from Navigant Consulting Inc.
Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI did not identify companies but said the probe involves firms across the financial services industry.
The FBI is working with the Securities and Exchange Commission, which has civil enforcement powers. The SEC said in January that it had about three dozen active investigations under way.
In the rush to sue big business, there is plenty of blame to go around in the subprime meltdown, said Mr Bizar, the lawyer who has represented lenders in subprime cases. Those include everyone from investors buying mortgage-related investments without understanding the risks, to credit-rating agencies that failed to alert investors to lenders’ precarious positions as mortgage delinquencies spiked.
But the mess can be blamed more on unrealistic expectations than fraud, he said.
‘You had a lot of people reaching to get into homes they couldn’t afford, on the theory that it would go up in value,’ Mr Bizar said. -- AP
UAE food prices head skywards
By Lynne Roberts
14 February 2008
Basic food prices in the UAE have rocketed by 36%, with basmati rice expected to increase by at least a further 70% a newspaper reported Thursday.
UAE daily Gulf news said an expected shortage in rice would send prices sky-high, with Pakistani rice suppliers threatening to reduce exports if prices are not increased to match Indian products.
The price of cooking oil has risen by 80%, Indian mutton by more than 100%, while cooking gas has increased by 30%, the newspaper said, adding that residents had been forced to shop for groceries in more affordable neighbouring countries.
Meanwhile, Saudi Arabia said it would withdraw subsidies from rice importers if prices continue to increase without good reason.
Dubai economist Eckart Woertz told Gulf News weak dollar-pegged Gulf currencies had made imports more expensive. “Food price inflation is a global phenomenon, but GCC countries are particularly affected …. if they revalue, food imports will become cheaper”, he said.
Elite China think-tank issues political reform blueprint
19 February 2008
BEIJING - CHINA risks dangerous instability unless it embraces democratic reforms to limit the power of the ruling Communist Party, foster competitive voting and rein in censors, the Party's top think-tank has warned in a new report.
The 'comprehensive political system reform plan' by scholars at the Central Party School in Beijing argues for steady liberalisation that its authors say can build a 'modern civil society' by 2020 and 'mature democracy and rule of law' in later decades.
The cost of delaying this course could be economic disarray and worsening corruption and public discontent, they write in Storming the Fortress: A Research Report on China's Political System Reform after the 17th Party Congress.
'Citizens' steadily rising democratic consciousness and the grave corruption among Party and government officials make it increasing urgent to press ahead with demands for political system reform,' the report states. 'The backwardness of the political system is affecting economic development.'
The report was finished in October, just after the Party's twice-a-decade congress ended and gave President Hu Jintao five more years as party chief. But it is only now appearing in some Beijing bookstores.
This is no manifesto for outright democracy. The authors say the Party must keep overall control and 'elite' decision-making will help China achieve lasting economic prosperity by pushing past obstacles to economic reform.
But the 366-page report give a strikingly detailed blueprint of how some elite advisers see political relaxation unfolding, with three phases of reform in the next 12 years, including restricting the Party's powers and expanding the rights of citizens, reporters, religious believers and lawmakers.
'Until now political reform has been scattered and inconsequential,' said Professor Wang Guixiu of the Party School not involved in the study. 'Real political reform needs a substantive plan of action, and there are some scholars and officials who believe that's what is needed now.'
The authors include Mr Zhou Tianyong and Mr Wang Changjiang, senior reform-minded scholars at the School, which trains officials for higher office. The report also has a preface by Mr Li Junru, a government adviser and vice-president of the Party School.
Unsettling social changes
The authors argue that government regulation of news is needed as China navigates unsettling social changes. But the present system of secretive and often arbitrary censorship is stoking corruption and public distrust of government, they said.
'Freedom of the press is an inevitable trend,' they said, calling for a law to protect reporters and 'effectively halt unconstitutional and unlawful interference in media activities'.
They also urge greater official respect for religion - a sensitive topic in China, where the atheist Party is wary of growing numbers of Christians, and unrest in Buddhist Tibet and the largely Muslim region of Xinjiang in the country's far west.
'Political faith and religious faith are not in contradiction,' the scholars said.
They propose that China's nearly 3,000-delegate national Parliament be slimmed down and given direct powers to set the budget and audit government spending.
Candidates for legislatures should be allowed to actively compete for votes, which is now banned, the authors said. And the Communist Party itself must bind itself under rule of law.
Communist Party chief Hu has promoted limited 'inner-Party democracy' to expose officials to more checks, but has shown no appetite for broad political liberalisation.
In a speech on Monday, Mr Hu said the Party had to be a 'staunch leadership core' that maintained 'flesh-and-blood bonds' with the people, Xinhua news agency reported.
But the Party School report, with its detailed arguments for change, and other books and essays from reformist advisers in the past year, suggest that some senior advisers have been thinking closely about much more ambitious reforms.
A recent survey of mid-ranking officials studying at the Party School indicated that growing numbers believe deeper political reform is needed.
In the survey of 154 officials conducted in late 2007, 55.5 per cent nominated the 'political system' as one of three areas of reform that most 'concerned' them, according to a study recently published by the Chinese Academy of Social Sciences.
In late 2005, 40 per cent of officials surveyed listed political reform as one of the areas. -- REUTERS
Quality wheat prices soar 90%
By Javier Blas
February 18 2008
Prices for top-quality spring wheat have jumped by 90 per cent in the past month and a half, boosted by a scramble by corporate consumers to secure scarce grain and speculative buying by investors.
A surge on Friday in prices for wheat used in bread to an all-time high of $19.88 a bushel - the highest yet paid for any wheat contract and a three-fold increase from a year ago - prompted the US baking industry to call for wheat exports to be curtailed.
The American Bakers Association stopped short of asking for an export moratorium but pressed for curbs on foreign sales. Lee Sanders, ABA vice-president for government relations, said there was usually a surplus in the US wheat market equivalent to three months of US consumption. 'It is currently at a very low one-month level, which is extremely concerning,' she said.
Cereals traders said it was unlikely Washington would support export curtailments, but added that the call highlighted the tightness of the market.
The US is the world's largest wheat exporter. Faced with strong overseas demand after extreme weather damaged other countries' crops, its wheat stocks are set to fall to a 60-year low this year.
The shortage of top-quality spring wheat is forcing US millers to consider buying Canadian supplies.
Vance Taylor, the general manager at state-owned North Dakota Mill, said his company could buy Canadian wheat for the first time since 1922. 'Spring wheat is in very short supply in the US,' he said.
Supplies of lower quality soft wheat, used for baking biscuits and other products, are more plentiful, traders said.
In Chicago, soft wheat traded at about $10.25 a bushel. Rising food prices will be the focus this week of the US department of agriculture annual outlook conference, the main gathering of the industry.
Since last year's edition, food inflation has surged around the world. William Lapp, president of Advanced Economic Solutions, a Nebraska-based food consultancy, said that one of the key themes of this year conference would be the realisation that the price surge was not a temporary hump but rather a structural change. 'We are not facing a short-term price blip...but a sustained move to a new and higher plateau for prices,' he added.
Chinese inflation set to hit 11-year high
By Richard McGregor in Beijing
Mon Feb 18, 1:55 PM ET
China is expected to record a January inflation rate above 7 per cent when figures are announced on Tuesday - setting an 11-year high and providing evidence of entrenched inflationary pressures.
Widespread expectations of a significant jump in retail inflation were on Monday reinforced when producer prices hit a three-year monthly high of 6.1 per cent, mainly as a result of winter transport bottlenecks and higher commodity prices.
The threat of enduring inflation will add significantly to the pressures on Beijing to allow an even faster appreciation of its tightly managed currency.
The renminbi, which has risen by about 13 per cent against the US dollar since mid-2005, has been rising more rapidly recently, in-creasing at an annualised rate of about 19 per cent in January.
Inflation has mainly been driven by high food prices - a trend exacerbated by severe winter storms last month disrupting the transport of farm produce and coal. But rising ex-factory prices - as manufacturers pass on higher energy costs - are helping to spread inflation, say economists.
"Although the acceleration in inflation in China has been predominantly driven by food over the past year, the trends in [producer price] statistics suggest increasing inflationary pressure in the pipeline," said Qing Wang, the greater China chief economist for Morgan Stanley investment bank.
Jun Ma, of Deutsche Bank in Hong Kong, said in a note on Monday that inflation could reach as high as 8 per cent by March.
There are signs that the global inflationary pressures that have fuelled higher Chinese food prices, through the rising cost of pig feed, might now endure well into this year - creating a further headache for Chinese policymakers.
Prices for top-quality spring wheat have jumped by 90 per cent in the past six weeks on global markets, as corporate consumers have scrambled to secure supplies and speculators have bought stocks.
Beijing is constrained in the use of interest rates in fighting inflation because of the implications for the renminbi. US interest rates, which have been falling as the Federal Reserve battles the housing and financial crises, are now 200-250 basis points lower than comparable ones in China.
As a result, China's central bank is, technically, losing billions of dollars a month on the foreign exchange reserves it invests in US dollar instruments because it is paying higher rates at home on renminbi bank bills than it is getting in the US.
With interest rates on the back burner, a higher renminbi has become an important weapon for the government to fight inflation, by lowering import costs of oil and other commodities as well as soyabeans. Eighty per cent of soyabean imports are used for pig feed.
Although higher Chinese costs and currency appreciation will inflate its export prices, China is still importing inflation rather than exporting it at the moment, say economists.
"If anything, what is happening in the US is affecting China rather than the other way around," said one Beijing-based economist.
Why European governments dare not let banks fail
ZURICH - WHATEVER their political hue, no European government has dared let a bank go bust since the outbreak of the subprime crisis.
That appears to be one of the lessons after Britain decided at the weekend to nationalise ailing mortgage lender Northern Rock and Germany drew up plans for a fresh bailout of stricken bank IKB .
Two factors have weighed heavily on governments and regulators in Britain and Germany - the growing importance of financial services in a post-industrial economy and fear that a bank failure at the height of a global credit crisis could set off a cataclysmic chain reaction.
‘When push comes to shove governments will intervene and support banks in a very major way,’ said Simon Adamson at CreditSights in London. ‘Banks cannot be allowed to fail especially when markets are in a fragile state.’
The collapse of subprime mortgages set off a global credit crisis as banks around the world were forced to write down the value of their investments in complex securities whose value was wiped out as borrowers defaulted on their loans.
The credit crunch has hit banks in different ways, threatening IKB with collapse in July, as the value of its subprime investments wilted, and triggering the first run in 140 years on a British bank as customers besieged Northern Rock.
Switzerland’s UBS has been the biggest casualty among Europe’s global banks, taking more than US$18 billion (S$25.6 billion) in writedowns on its subprime exposures in 2007, but has been able to line up a capital injection from Singapore and the Middle East without seeking help from the authorities.
‘Although UBS’s writedowns dwarf those of other banks, it can absorb them. It was not in the desperate situation of the Germans or Northern Rock,’ said Mr Adamson.
Europe’s history of bank failures
Northern Rock had no direct holdings of subprime investments but found its main source of funding - borrowing from other banks - had dried up when financial institutions shrank from lending to each other as the subprime crisis gathered pace.
Bank failures, even involving large lenders, are not unheard of in Europe but government-orchestrated bailouts have often ensured that depositors did not lose their savings.
Italy’s Banco Ambrosiano collapsed under a welter of bad debts in 1982 and was rescued by a consortium of Italian banks organised by the Bank of Italy. More than a decade later Banco Santander saved Banesto from failure in 1994 by taking the bank over at the request of the Spanish central bank.
British-based BCCI was wound up in 1991, but it did not have a large retail network in Britain. Media images of throngs of anxious customers trying to get their savings out of Northern Rock prompted the British government to guarantee deposits.
British merchant bank Barings was bought for a token sum by Dutch bank ING in 1995 after rogue trader Nick Leeson bankrupted the company, but it too had no retail customers.
Banks may have never been more prominent in Europe’s economies than they are now as industry recedes.
‘The interesting point here is the centrality of financial services in these countries. Just as in the 1970s when industrial companies were in crisis they got government support, we are now seeing that in the financial services sector,’ said Ian Harnett, a director at Absolute Strategy in London.
‘Financial services are much more central to the wellbeing of the economy overall,’ he added.
Jochen Sanio, head of Germany’s financial regulator BaFin, warned in July that IKB’s collapse could spark the country’s worst banking crisis in 75 years.
The inability to find a buyer either for Northern Rock or for IKB also left the authorities with no option but to step in.
‘In each case where it was not possible to find a private solution or an investor there was state aid, both in Britain and in Germany,’ said Andreas Weese, an analyst at UniCredit.
The richest irony of the subprime crisis in Europe, has been that Britain, a country that has embraced free markets with more enthusiasm than any Western European nation, should reluctantly have been forced to act in much the same way as Germany.
Fitch Ratings, the only ratings agency to assign ratings measuring the probability of government rescue if a bank gets into trouble, rated both IKB and SachsenLB, another German state bank bailed out in 2007, a 1 before the subprime crisis.
That is the highest ‘support rating’ on a scale of 5 to 1 measuring the probability of a state intervention in a crisis.
Northern Rock was only rated a 3.
‘In other circumstances it is conceivable that the British authorities could have let Northern Rock go (fail) but because the run happened in the context of a far broader problem it was not possible,’ said a ratings analyst who asked not to be identified. -- REUTERS
SHANGHAI, Feb 19 (Reuters) - Bank of East Asia (0023.HK: Quote, Profile, Research), Hong Kong’s fifth-largest lender by assets, expects growth of its lending in the mainland Chinese market to slow sharply this year, a senior executive of the bank said on Tuesday.
Growth is likely to slow to about 30 percent in 2008 from 70 percent in 2007 because of the government’s drive to restrict new lending in order to cool the economy, said Lam Chi Man, executive vice president of Bank of East Asia (China), the bank’s wholly owned China unit.
However, Lam also told Reuters that Bank of East Asia would continue to expand its China presence rapidly. He said it aimed to open about 25 new offices, including sub-branches, in the country this year and add around 1,000 new staff, compared to its current mainland China staff of about 2,700. (Reporting by George Chen; Editing by Andrew Torchia)
王冠一 ：敗 絮 其 中 股 市 照 托 ？
2008年02月19日
美 國 昨 日 乃 總 統 紀 念 日 假 期 ， 金 融 市 場 休 市 一 天 。 然 承 接 上 周 五 美 股 收 市 3 大 指 中 表 現 各 異 ─ ─ 道 指 跌 28 點 、 標 普 500 升 1.3 點 、 納 指 跌 10 點 ， 令 亞 太 股 市 無 所 適 從 。 昨 率 先 開 市 的 澳 紐 ， 前 者 收 市 跌 0.86% ， 後 者 則 升 2.59% ， 兩 鄰 居 表 現 如 斯 ， 可 謂 相 映 成 趣 。
熊 市 博 反 彈 勝 算 低
亞 洲 3 大 「 投 注 站 」 又 如 何 ？ 日 本 早 段 升 超 過 1% ， 收 市 幾 打 回 原 形 （ 僅 升 0.09% ） 、 南 韓 走 勢 一 樣 ， 升 幅 也 盡 相 同 ， 只 有 港 股 先 升 後 急 跌 ， 收 市 跌 近 390 點 或 1.61% 。 上 周 五 以 為 其 餘 兩 投 注 站 股 市 皆 下 跌 （ 日 經 微 軟 0.03% 、 Kospi 急 挫 1.38% ） ， 自 己 應 頂 得 住 二 萬 四 點 的 香 港 股 民 ， 多 成 為 甕 中 之 鱉 。
筆 者 曾 多 番 提 醒 ， 在 熊 市 中 博 反 彈 乃 犯 上 原 則 性 錯 誤 ， 汝 等 散 戶 那 有 大 戶 般 精 明 ？ 連 反 彈 浪 都 俾 你 捉 到 兼 賺 到 錢 ， 就 唔 係 散 戶 啦 ！ 由 是 之 故 ， 只 可 以 趁 每 次 反 彈 出 貨 或 沽 空 ， 不 然 難 保 或 要 去 東 華 三 院 平 和 坊 求 助 （ 見 昨 日 《 蘋 果 》 港 聞 版 ） 矣 ！
美 國 經 濟 狀 況 如 何 ， 難 逃 讀 者 法 眼 ， 上 周 兩 個 趨 差 勁 的 經 濟 數 據 ─ ─ 2 月 麥 歇 根 大 學 消 費 信 心 指 數 ， 由 1 月 的 78.4 急 挫 至 69.6 ， 是 自 1992 年 以 來 最 差 ； 另 外 2 月 紐 約 製 造 業 指 數 由 1 月 的 9 點 （ 正 數 ） ， 下 跌 至 負 11.7 ， 該 數 字 若 跌 穿 0 （ 即 見 負 數 ） ， 代 表 製 造 業 萎 縮 ， 數 字 是 05 年 以 來 首 見 「 負 」 者 ！
美 國 續 有 數 據 公 佈
今 個 星 期 有 今 日 的 2 月 全 國 建 屋 協 會 （ NAHB ） 活 動 數 字 （ 12 月 跌 至 18 的 有 史 以 來 最 低 水 平 ） ， 以 及 明 日 的 新 屋 興 建 及 通 脹 數 據 ， 前 者 1 月 份 數 字 應 比 12 月 略 小 ， 後 者 不 排 除 非 核 心 數 字 超 過 4% 。 苟 如 是 ， 則 又 要 看 看 「 有 心 人 」 用 甚 麼 板 斧 或 藉 口 來 托 市 了 ！
After China Ships Out iPhones, Smugglers Make It a Return Trip
By DAVID BARBOZA
February 18, 2008
SHANGHAI — Factories here churn out iPhones that are exported to the United States and Europe. Then thousands of them are smuggled right back into China.
The strange journey of Apple’s popular iPhone, to nearly every corner of the world, shows what happens when the world’s hottest consumer product defies a company’s attempt to slowly introduce it in new markets.
The iPhone has been swept up in a frenzy of global smuggling and word-of-mouth marketing that leads friends to ask friends, “While you’re in the U.S., would you mind picking up an iPhone for me?”
These unofficial distribution networks help explain a mystery that analysts who follow Apple have been pondering: why is there a large gap between the number of iPhones that Apple says it sold last year, about 3.7 million, and the 2.3 million that are actually registered on the networks of its wireless partners in the United States and Europe?
The answer now seems clear. For months, tourists, small entrepreneurs and smugglers of electronic goods have been buying iPhones in the United States and then shipping them overseas.
There the phones’ digital locks are broken so they can work on local cellular networks, and they are outfitted with localized software, essentially undermining Apple’s effort to introduce the phone with exclusive partnership deals, similar to its primary partnership agreement with AT&T in the United States.
“There’s no question many of them are ending up abroad,” said Charles R. Wolf, an analyst who follows Apple for Needham & Company.
For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts.
But those economic realities do not play into the mind of Daniel Pan, a 22-year-old Web site designer in Shanghai who says a friend recently bought an iPhone for him in the United States.
He and other people here often pay $450 to $600 to get a phone that sells for $400 in the United States. But they are happy.
“This is even better than I thought it would be,” he said, toying with his iPhone at an upscale coffee shop. “This is definitely one of the great inventions of this century.”
Mr. Pan is among the new breed of young professionals in China who can afford to buy the latest gadgets and the coolest Western brands. IPhones are widely available at electronic stores in big cities, and many stores offer unlocking services for imported phones.
Chinese sellers of iPhones say they typically get the phones from suppliers who buy them in the United States, then have them shipped or brought to China by airline passengers.
Often, they say, the phones are given to members of Chinese tourist groups or Chinese airline flight attendants, who are typically paid a commission of about $30 for every phone they deliver.
Although unlocking the phone violates Apple’s purchase agreement, it does not appear to violate any laws here, though many stores may be avoiding import duties.
Considering China’s penchant for smuggling and counterfeiting high-quality goods, the huge number of iPhones being sold here is not surprising, particularly given the popularity of the Apple brand in China.
Indeed, within months of the release of the iPhone in the United States last June, iPhone knockoffs, or iClones as some have called them, were selling here for as little as $125. But most people opt for the real thing.
“A lot of people here want to get an iPhone,” says Conlyn Chan, 31, a lawyer who was born in Taiwan and now lives in Shanghai. “I know a guy who went back to the States and bought 20 iPhones. He even gave one to his driver.”
Negotiations between Apple and China Mobile, the world’s biggest mobile-phone service operator with more than 350 million subscribers, broke down last month, stalling the official release of the iPhone in China. Long before that, however, there was a thriving gray market.
“I love all of Apple’s products,” said a 27-year-old Beijing engineer named Chen Chen who found his iPhone through a bulletin board Web site. “I bought mine for $625 last October, and the seller helped me unlock it. Reading and sending Chinese messages is no problem.”
An iPhone purchased in Shanghai or Beijing typically costs about $555. To unlock the phone and add Chinese language software costs an additional $25.
For Apple, the sale of iPhones to people who ship them to China is a source of revenue. But the company is still losing out, because its exclusive deals with phone service providers bring in revenue after the phone is sold. If the phones were activated in the United States, Apple would receive as much as $120 a year per user from AT&T, analysts say.
But there are forces working against that. Programmers around the world collaborate on and share programs that unlock the iPhone, racing to put out new versions when Apple updates its defenses.
While Apple has not strongly condemned unlocking, it has warned consumers that this violates the purchase agreement and can cause problems with software updates.
Some analysts say abandoning the locked phone system and allowing buyers to sign up with any carrier they choose, in any country, could spur sales.
“The model is threatened,” Mr. Wolf, the analyst, said. But “if they sold the phone unlocked with no exclusive carrier, demand could be much higher.”
An Apple spokeswoman declined to comment on the proliferation of iPhones in China. When asked about the number of unlocked iPhones during a conference call with analysts last month, Timothy D. Cook, Apple’s chief operating officer, said it was “significant in the quarter, but we’re unsure how to reliably estimate the number.”
The copycat models are another possible threat to Apple. Not long after the iPhone was released, research and development teams in China were taking it apart, trying to copy or steal the design and software for use in knockoffs.
Some people who have used the clones say they are sophisticated and have many functions that mimic the iPhone.
In Shanghai, television advertisements market the Ai Feng, a phone with a name that sounds like iPhone but in Chinese translates roughly as the Crazy Love. That phone sells for about $125.
Some of the sellers of the copycats admit the phones are a scam.
“It’s a fake iPhone, but it looks nearly the same,” said a man who answered the phone last week at the Shenzhen Sunshine Trade Company, in southern China’s biggest electronics manufacturing area. “We manufacture it by ourselves. We have our own R. &D. group and manufacturing plant. Most of our products are for export.”
Most people here seem to want the glory that comes with showing off a real iPhone to friends.
“My friends envy me a lot,” says Mr. Pan, the Web designer. “They say, “Wow, you can get an iPhone.’ ”
278 HDB flats swamped by 9,900 applications
Unsuccessful buyers urged to consider build-to-order flats
February 19, 2008
THE Housing and Development Board received 9,900 applications for 278 flats offered in its February bi-monthly sale.
Most of the units offered are four-room flats, plus 64 five-room units and 20 executive flats in 13 estates.
There are 119 units in Toa Payoh and 39 in Tampines.
HDB said the strong demand was 'because the flats offered are in established HDB towns which are popular with buyers, but the supply of new flats is tight as there is limited land available'.
HDB advised unsuccessful applicants to consider booking a flat under its build-to-order (BTO) scheme. About 4,500 flats will be launched under this scheme in the first half of the year.
More than 500 are still available from recent BTO launches at Punggol and Sengkang, such as Treelodge@Punggol, Fernvale Vista, Punggol Vista and Coral Spring.
HDB also suggested that buyers also consider resale flats, which it said still remain largely affordable. It said that in January, 25 per cent of resale transactions were completed at prices no more than $10,000 above valuation.
The recently closed sale is HDB's fifth bi-monthly sale exercise for four-room and larger flats in the combined balloting/walk-in system. HDB is currently reviewing the scheme.
Maybank's home loan rate cut sets cat among pigeons
Analysts divided on whether this will signal undercutting among the banks
By CHOW PENN NEE
February 19, 2008
(SINGAPORE) Maybank has fired a salvo that could shake up the home loan market here by slashing its rates. This has led to speculation that banks might start to undercut each other to drum up business. Meanwhile, the banks themselves are adopting a cautious stance in a falling interest rate environment that could change direction.
For a three-week period, Maybank is launching a promotional three-year fixed rate home loan package which is the lowest of all the banks surveyed.
Home-owners pay 1.68 per cent per annum for the first year, 2.68 per cent pa for second year and 3.38 per cent pa for the third year. The rates apply to both HDB and private home loans. Homeowners are subject to a three-year lock-in period and fees will apply in case of early redemption, prepayment and cancellation during that time.
Before this promotion, the Qualifying Full Bank's rates stood at 3.58 per cent pa for all three years. Maybank's new first-year interest rate is about 40 per cent lower than similar packages being offered in the market (see table). But it has a lock-in period of three years while other banks generally have a two-year lock-in.
Helen Neo, head, consumer banking, Maybank Singapore, explained that interbank rates have softened over the past few months. 'However, we expect interest rates to rebound in view of rising inflation in Singapore,' she said. 'Against a backdrop of potential rising interest rates, home loan customers who take up this fixed rate package will enjoy the prevailing low rates and are protected from future interest rate increases for the next three years.'
Mortgage rates are affected by the Singapore interbank offer rate (Sibor) - the rate at which banks lend to one another. Sibor has been on a downward trajectory since late last year, after hovering around 2.5 per cent.
Yesterday, the three-month Sibor fell to 1.44 per cent, its lowest level since December 2004. Economists say it is expected to go even lower by mid-year, partly due to the US steadily cutting its key interest rate. Sibor takes its cue from interest rates in the US, and last month the US Federal Reserve slashed its key interest rate from 4.25 per cent to 3.5 per cent, and then to 3 per cent.
Maybank's move to reduce rates is prompting speculation among mortgage consultants that banks could follow suit with foreign banks leading the way. 'I'm not surprised that this round of interest rate reductions is led by foreign banks again,' said Dennis Ng, spokesman for Mortgage Consultancy Portal www.HousingLoanSG. com. 'From past experience, local banks have typically lagged behind foreign banks in adjusting interest rates down.' This is because the three local banks have the lion's share of the housing loan market. 'If they reduce interest rates, they have more to lose,' said Mr Ng. While cutting rates would let them gain some more business, the advantage would be neutralised if their existing clients start paying lower rates.
But with Sibor falling, other banks could follow suit in lowering their interest rates, Mr Ng said. The last time banks were seen aggressively undercutting each other on rates was in 2003-2004, where foreign banks actively led the charge in introducing lower rates.
Leong Sze Hian, president of the Society of Financial Service Professionals, agreed that banks would be nudged into lowering their rates. 'Sibor rates are dropping and once Maybank lowers its rates, everyone will follow, otherwise customers will move,' he said.
However, consultants like Tang Yin Fong, a mortgage advisor at wealth and investment outfit Providend, said local banks already have Sibor-linked packages which track the movement of Sibor, and do not need to lower rates to be competitive.
'Such packages have been relatively attractive in the current lowered Sibor environment and have since been the main packages that the banks recommend to homeowners,' she explained.
She also added that in the current situation where the Singapore property market still seems to be on the rise and more homeowners are seeking mortgage loans, banks may be less willing to lower their interest rates.
Meanwhile, DBS Bank said it has 'no plans to adjust rates' for now, while OCBC and United Overseas Bank both said they would monitor the situation before making a decision.
Foreign banks Citibank and Standard Chartered shied away from saying if they will review rates but pointed to their Sibor packages, which they say give customers control in repricing loan packages. Stuart Kamp, head of mortgages, Standard Chartered Bank, added, 'We expect interest rates to trend down over the coming months.'
BUDGET 2008: Analysts see pay-offs only in the longer-term
R&D carrot may be ideal diet for some outfits
Estate duty abolition may also help banks and push up property prices
By UMA SHANKARI
February 19, 2008
(SINGAPORE) It was a Budget that failed to excite the stock market very much, but analysts said that some of the initiatives announced could benefit research-intensive firms and companies in the healthcare, technology, finance and property sectors - mostly in the longer term.
Shrugging off Friday's Budget announcement, the benchmark Straits Times Index fell 5.34 points - or 0.2 per cent - to close at 3,083.3 points yesterday.
As UOB Kay Hian predicted at the start of the day: 'Concerns over a slower earnings growth and higher inflation will limit any euphoric market rally.'
But contrary to what was suggested by the market, some listed companies here will be better off due to the Budget, analysts said. Singapore's bid to move up the R&D value chain could perhaps have the most impact, the analysts added.
OCBC Investment Research said that Biosensors International, LMA NV and ST Engineering could benefit as Singapore increases its yearly R&D spending to $7.5 billion, or 3 per cent of GDP, by 2010.
The firm also said that Venture Corporation and Chartered Semiconductor - both of which spent a substantial proportion of their operating expenses in R&D - stand to benefit in particular as the R&D tax deduction is increased from 100 per cent to 150 per cent and an R&D tax allowance of up to 50 per cent of the first $300,000 of taxable income is given.
'Both Venture Corporation and Chartered Semiconductor spent a substantial proportion of their operating expenses in R&D,' OCBC's research unit said in a note yesterday. 'Venture spent about $29.6 million on R&D in FY07, while Chartered spent about $159.8 million. We can expect both companies to see significant tax reductions in the coming years.'
UOB Kay Hian similarly identified Creative Technology, Venture Corp and Biosensors as listed companies that could gain from the R&D push.
Also expected to have a major impact is the abolition of estate duty, which analysts said could boost Singapore's competitiveness as the region's wealth management hub and attract more foreign investment.
'We think the removal of estate duty is good news for the Singapore property market, as real estate is a natural choice for some of this money to be invested, especially with high inflation and negative real returns,' said Lehman Brothers in a note yesterday.
The research firm noted that property prices generally gain in the 12 months following the removal of estate duty. The note said: 'Malaysia abolished the estate duty in late 1991 and home prices rose 12 per cent on average in the ensuing 12 months. More recently, Hong Kong abolished the estate duty in early 2006 and property prices were up 6 per cent on average in the following 12 months. We think this could be more than coincidence.'
UOB Kay Hian, on the other hand, said that the clearest beneficiaries from the removal of estate duty would be financial institutions. The firm reiterated its 'buy' calls on DBS, OCBC and Hong Leong Finance in view of this.
UOB Kay Hian also said that listed medical plays such as Raffles Medical Group and Parkway Holdings will benefit from the government's commitment to implementing means testing - which allows for a gradual shift of high-income patients from government hospitals to private hospitals.
However, there is a consensus among analysts that any boost from this Budget is expected to kick in only in the longer term.
'The business-related Budget initiatives are part of the government's ongoing efforts to transform the Singapore economy into a knowledge-based economy and grow the services sector, in our view,' Deutsche Bank summed up in a note. 'While positive in the long term, these moves are unlikely to have a tangible impact in the near term.'
S'pore c.bank: challenge to stop credit crisis spiral
By Jan Dahinten
SINGAPORE, Feb 19 (Reuters) - Singapore's central bank on Tuesday warned that the global credit crisis may spread and said the main challenge was to stop it from bleeding the real economy.
"At this point there is a risk of being caught in a negative spiral. Tightening credit standards and reduced credit availability will be mutually reinforcing with the slowing of the macro economy," Heng Swee Keat, managing director of the Monetary Authority of Singapore, said in a speech.
"The immediate challenge for policy makers is to contain the spread of the credit crisis to the real economy, to prevent this spiral," he said at the IMAS investment conference.
Heng said that limiting the scope of the crisis was difficult as the level of exposure to risky debt was unclear, and because central bankers faced different degrees of slowing growth and inflationary pressures in their economies.
"This time last year, the global economic outlook was positive. Today, it has become a lot more uncertain."
Swiss bank Credit Suisse became the latest casualty of the credit crisis on Tuesday, when said it wrote $2.85 billion off the value of its asset-backed investments and found mismarking and pricing errors on its books, sending its shares plummeting.
Heng said that while only a few investment funds had experienced withdrawals of funds but that this could change if markets carried on falling.
"If asset prices continue to decline, investors may react differently. This is a risk we need to watch.
"In this state of flux, central banks and financial regulators need to be on heightened alert and respond decisively to developments that might further threaten global growth or financial stability."
Australia Raises Scrutiny For Sovereign Funds
Shu-Ching Jean Chen
02.19.08
HONG KONG - Australia has become the first country to react to mounting public concerns over the growing clout of overseas sovereign wealth funds, unveiling a set of screening criteria that will be used by Australian regulators in determining whether to allow investment made by these funds.
Intriguingly, the list of six overarching principles was released Sunday by Australian Treasurer Wayne Swan just days before the Foreign Investment Review Board is set to deliberate on a 16.5 billion Australian dollar ($15 billion) investment in Rio Tinto by the Chinese government-owned company Chinalco in partnership with the U.S. aluminum giant Alcoa.
Prime Minister Kevin Rudd also weighed in a day later, saying foreign state-owned wealth funds will face close scrutiny. In an interview on Monday with the Australian Broadcasting Corporation, Rudd stressed he wasn't specifically commenting on a particular company, but later stated his intention to hold talks with Chinese leadership about their long-term strategy and Australia’s strategic interests.
In announcing its six principles, Australia became the first country to try to make its screening process for regulating investments by foreign sovereign wealth funds more transparent and predictable.
In the United States, growing anxiety over the rising influences of sovereign wealth funds has led to a heated debate over national security implications and prompted the International Monetary Fund to start work on a code of conduct for sovereign wealth funds at the behest of G-7 nations.
Australian media interpreted the move by its Treasury as a way to avoid future diplomatic hiccups should it veto any investments.
Swan pointed out in an interview with the state broadcaster ABC News Radio that, “the judgment that I will make as a treasurer on a case by case basis is whether they are operating commercially and whether they are, in particular, in the national interest. So we put down six principles-- principles that we will use to judge these on a case by case basis.”
According to an official statement issued by the Treasury, chief among the six guidelines is whether the entities making the investment “are independent from the relevant foreign government,” including such issues as the extent to which it operates at arm’s length from their government, whether it is controlled by a foreign government, including funding arrangements.
Second is whether it follows common standards of business behavior showing clear commercial objectives and good corporate governance practices.
Third is impact on competition: would the investment lead to undue concentration or control in the industry or sectors affected?
The remaining items on the checklist include whether the investment would impact Australian tax revenue or government policies, whether it would have a national security impact, and lastly, the impact on the target business’ operations and direction and its contribution to the Australian economy and broader community.
Melbourne Business School professor Paul Kerin told The Australian newspaper the guidelines were an improvement from the current regime, under which an investment could be vetoed due to domestic political lobbies such as threatened boards and unions. However, he said transparency would be enhanced further if the treasurer were also required to provide a detailed explanation for any veto, including releasing the Foreign Investment Review Board's full recommendation, to avoid the new criteria being held hostage by other xenophobia motivations.
Australia has long been a destination of choice for the Singaporean sovereign wealth funds Temasek and the Government of Investment Corporation. Temasek’s SingTel bought the telecom company Optus in 2001 and its affiliated SingPower won control of Victoria state electricity assets in 2004. Collectively, they own assets in Australia worth more than 20 billion Australian dollars ($18.39 billion), according to The Australian. By comparison, the Australian government has approved Chinese investments totaling nearly 5 billion Australian dollars ($4.6 billion) in the past 12 months, the paper said.
In recent months, China’s State Administration of Foreign Exchange has quietly bought stakes in National Australia Bank, Australia and New Zealand Banking Group and Commonwealth Bank of Australia.
Bond Insurer Split May Trigger Lawsuits, Analysts Say
By Cecile Gutscher
Feb. 18 (Bloomberg) -- Regulators' plans to break up bond insurers into ``good'' businesses covering municipal debt and ``bad'' businesses liable to subprime-related losses may trigger ``years of litigation,'' Bank of America Corp. analysts said.
New York Insurance Department Superintendent Eric Dinallo and New York Governor Eliot Spitzer said last week that insurers may need to be divided if they can't raise enough capital to compensate for losses on subprime-mortgage guarantees. FGIC Corp., the fourth-largest of the so-called monoline insurers, asked to be split on Feb. 15 after Moody's Investors Service cut the Stamford, Connecticut-based company's top Aaa ranking.
``It is the equivalent of going to a casino and trying to keep only the winning bets,'' said Tim Mercer, chief investment officer at Hong Kong-based hedge fund Musashi Capital Ltd. ``This would be a straightforward case of fraudulent conveyance and everyone involved would be liable for damages from deprived creditors.''
FGIC, owned by Blackstone Group LP and PMI Group Inc., insures about $314 billion of debt, including $220 billion in municipal bonds. The company said last week it applied for a license from New York state insurance regulators to create a standalone municipal company and separate the unit that guarantees subprime-mortgage bonds and related securities that led to rating downgrades.
New York-based Ambac Financial Group Inc., the second- largest bond insurer, may also seek a split, the Wall Street Journal reported today, citing a person familiar with the situation.
`Legal Challenges'
``Despite the regulatory interest in separating the exposures, the essential fact remains that all policy holders, whether municipal or structured finance, entered into contracts backed by the entire entity,'' analysts led by Jeffrey Rosenberg in New York wrote in a note to investors dated Feb. 15. A breakup is ``likely to lead to significant legal challenges holding up the resolution of the monoline issues for years.''
Investors in credit-default swaps based on the bond insurers may also seek damages to compensate for losses, according to the research note.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
`Deeply Distressed'
The cost of credit-default swaps on Armonk, New York-based MBIA Inc., the world's largest bond insurer, has soared to $1.7 million upfront and $500,000 a year to protect $10 million of bonds from default for five years, according to CMA Datavision. Ambac credit-default swaps were at the same level as MBIA at the close of trading in New York on Feb. 15. The contracts, which cost $25,000 a year ago, trade upfront when investors see a risk of imminent default.
Any breakup of the companies may cause ``significant widening'' in the credit-default swaps as the structured finance company is likely to be ``deeply distressed,'' the Bank of America report said.
``The authorities' encouragement of such a solution reveals their fundamental misunderstanding of basic commercial law and principles and also their sense of desperation,'' said Musashi Capital's Mercer.
Postbank up pre-bourse as HSBC and RBS reportedly eyeing buying bank
FRANKFURT, Feb 19, 2008 -- Shares in Deutsche Postbank AG were higher in pre-bourse deals after a report in the Westdeutsche Allgemeine Zeitung said that Royal Bank of Scotland and HSBC Holdings have indicated they would be interested in buying the bank, churning up M&A speculation that has followed the bank for weeks.
At 8.30 am, shares in Postbank were 0.31 pct higher at 62.38 in pre-bourse electronic trade, up from yesterday's close at 62.18.
"It is really no surprise that foreign banks may also be interested in Deutsche Postbank, but the German government said yesterday that it favours a national solution," said a Frankfurt-based trader.
"Nevertheless [the news is] positive, as it lifts a possible auction price," he added.
"Deutsche Post AG, which owns 50.0 pct plus one share [in Postbank], is expected to decide on a disposal by the end of this year," said another trader.
"There is ample time to speculate, which bank or other institution is going to acquire Postbank and considering the management changes at Deutsche Post, a decision might even be delayed as other topics prevail. After its mail carrier unit, financial services are second best earnings performer in Deutsche Post's business mix," the trader explained.
HSBC and Royal Bank of Scotland have signalled their interested in acquiring Deutsche Postbank AG, daily Westdeutsche Allgemeine reported.
In addition, a Dutch bank is also interested in Postbank, the paper said, citing sources in Deutsche Post's supervisory board.
Commerzbank AG and Deutsche Bank AG have already declared their their interest in taking over Postbank.
A report in yesterday's Handelsblatt also said that the German government wants Deutsche Post to sell its stake, with Commmerzbank as its preferred buyer.
Deutsche Post replaced its chief executive Zumwinkel with former management board member Frank Appel yesterday. Zumwinkel offered to resign on Friday after his private house and offices were raided as part of a 1 mln eur tax fraud charge.
The sleaze behind the sleaze of Hong Kong’s sex photos
Maybe there’s more to Edison Chen’s troubles than theft by a computer technician
17 February 2008
Don’t expect Hong Kong’s overheated media to give a full account of the so-called Internet sex photos scandal, despite the fact that local newspapers have been repairing their balance sheets with it for weeks and giving the public a liberal daily lacing of all the titillation fit to print.
The real scandal is not the perfectly normal, if somewhat energetic, sexual activities of singer Edison Chen and his various singer/actress girlfriends. There could even be more to come, but who in Hong Kong truly believes that “innocent looking” girls in their early 20s in the entertainment business (or anywhere outside a convent) are virgins? If they were it would be a man-bites-dog story.
The real scandal likely cannot be told because it lies buried in the obscure but crucial relationships between Hong Kong’s entertainment industry, organized crime, the government and police. This was the very police force that started arresting a few Internet users who had passed on the sexy pix to their friends despite the fact that the photos had not been ruled obscene. Subsequently the relevant Hong Kong panel ruled the pictures indecent rather than obscene.
Anyway, by then the photos had been on-passed to Web sites around the world – not just Chinese language ones ‑ and kicked off a stunning brouhaha. Major Chinese newspapers increased their press runs by 30 percent to handle street sales from the story. It is likely that at least a million people in Hong Kong alone have seen some of the raunchier ones in full anatomical detail. Millions more have seen the printed version, genitalia obscured, which have been published in feverish local magazines and newspapers.
In an Internet world rife with pornography and nudity, the Hong Kong officials’ decision to raid the computer shop that repaired (and apparently looted) Chen’s laptop was unusual. Nine people were arrested, with Hong Kong’s Commissioner of Police, Tang King-shing, warning sternly that mere possession of the photos would violate the territory’s Colonial-era obscenity law. One man was detained for days without bail but was eventually released.
The police and the government in general may have rushed to make this an important issue because one of the indirect victims was Albert Yeung, head of the Emperor Entertainment Group, whose family hails from the tough Chiu Chow region of southern China. The female Cantopop stars’ sex exploits exposed by Edison Chen’s photos were all members of Yeung’s stable of entertainers. One of them, Vincy Yeung, was his niece, a daughter of his brother.
According to official reports, the photos became public because they were downloaded by a computer technician who had been given Chen’s pink Apple laptop computer to repair. The technician then gradually released them to the Internet. However, though this story may hold water in some respects, it looks unlikely to be the whole truth. It certainly does not fully explain why the photos surfaced when they did, or why new photos continue to make their appearance. This suggests that someone other than the technician has control of the smut cache, which according to some reports is said to run to hundred of stills and video clips and to involve 10 or so girls.
Yeung himself is a well-known business figure long said – and of course denied – to have or have had connections to the Sun Yee On triad, a criminal organization of long repute with activities in Hong Kong, China and beyond. He has had several brushes with the law. In 1981 he was jailed for attempting to pervert the course of justice and in 1995 was cleared of criminal intimidation and false imprisonment after all five prosecution witnesses suffered sudden memory lapses when called to testify.
Triad activity has long been known to be rife in the film and entertainment business in Hong Kong and the Cantopop industry is among its most profitable aspects. Although Yeung has many other business interests, ranging from a casino in Pyongyang to hotels and jewelry stores in Hong Kong, he is best known for his role in the entertainment industry and even into his 60s is noted in the gossip columns for his attraction to budding female performers.
The media frenzy over the sex photos may even help others in the industry, particularly the magazines and newspapers which have seen their circulations soar. However the careers of Emperor’s leading starlets are likely to suffer dramatically, unless they shift to the porn industry. Unlike in the west, where filmed Internet sex has caused barely a hiccup in the careers of Pamela Anderson, Britney Speers, Paris Hilton and others, in Hong Kong this kind of thing is not taken lightly. Edison Chen himself, who has appeared in 25 Hong Kong movies since 2000 including the immensely popular Infernal Affairs trio, is said to be prudently staying in North America because relatives of the singer’s many actress-girlfriends may have powerful relatives who wish to do him harm when he returns.
It also just happens that the photo frenzy coincided with the stock market listing of another part of Yeung’s empire, New Media Group Holdings which publishes five weekly titles. Despite the generally depressed market, New Media was 48 times oversubscribed and doubled in price when trading began.
Yeung’s lesser known rival in the media business is the China Star group run by Charles Heung Wah-keung, also of Chiu Chow origin. Heung is a son of the reputed founder of Sun Yee On and was himself identified as an office bearer of the triad in a report on organized crime to the US Senate.
Internet blogs such as asianfanatics.net are full of all kinds of theories relating to the photos, with suggestions of extortion and other criminal activities more serious than pornography, theft of data or invasion of privacy. They draw heavily on the background and past records of various players.
Also noteworthy could be Albert Yeung’s strong links to Chinese Communist Party figures who have the ear of the Hong Kong government which, for whatever reasons, prefers to ignore his brushes with the law and regard him as a useful and patriotic businessman.
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