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«Oldest ‹Older 201 – 252 of 252Is China's growth losing steam?
Net exports, once a significant contributor to economic growth, is becoming a drag
By TIGER TONG
April 25, 2008
CHINA, the world's fastest growing major economy, realised 10.6 per cent growth in gross domestic product (GDP) in the first quarter of 2008. Though 1.1 percentage points lower than the same period last year, the figure still represents a handsome growth rate.
But it remains unclear how much domestic consumption and investment has helped to fill the gap left by the slowdown in net exports.
Amid the rising imports growth and the declining exports growth, net exports, once a significant contributor to China's economic growth, has turned out to be a drag.
During the January-March period, the growth rate of exports was 21.4 per cent, 6.4 percentage points lower than the same period last year. In contrast, imports grew by 28.6 per cent, up 9.4 percentage points year on year.
As a result, net exports decreased by 10 per cent (this figure would be 17.5 per cent when measured in yuan). It seems that growth in China's trade surplus is losing momentum this year after reaching a record high in 2007.
The narrowing trade surplus in the first quarter might not just be temporary phenomenon. It could reflect a long-term trend. Previously, China's exports growth had always outpaced imports growth. However, the trend reversed late last year. From October 2007 to February 2008, China's imports grew faster than exports for five consecutive months. It only bucked the trend in March. The slowing down of the US economy is certainly taking a toll on China's exports. In the first quarter, China's exports to the United States, its second-largest trading partner, grew by only 5.4 per cent, 15 percentage points lower than the same period in 2007.
So far, its exports to the European Union (EU), China's biggest trading partner, remain robust. In the first quarter, exports to the EU grew by 24.2 per cent, partly because the yuan is depreciating against euro while appreciating against the US dollar. But with the deepening of the US recession, EU will feel more economic pain and China's exports growth to the EU can be expected to slow down.
As well, soaring commodity prices have forced China to pay more for imports. In the first quarter, China paid 90 per cent more for imported crude oil, which was only 14.9 per cent more than the amount when measured by tonnage. During the same period, while the volume of iron ore imports grew by only 10.5 per cent, China paid almost double the price.
Net exports growth has been playing an increasingly important role in GDP growth in past years. For example, in 2003, net exports growth only contributed 0.1 percentage points to China's 10 per cent GDP growth. In 2007, this figure soared to 2.7 percentage points. Without net exports growth, China's GDP growth in the past few years would be only around 9 per cent.
The National Statistics Bureau, instead of providing a breakdown by categories such as consumption, investment and net exports, gives the quarterly GDP figures to value-added output of agriculture, industry & construction and services.
Therefore it is very hard to gauge the respective contribution of consumption, investment and net exports to GDP growth.
But based on foreign trade figures provided by the Chinese authorities, we can estimate the size of the gap left by the decreased net exports in the first quarter.
Due to the fact that net service exports (which is negative now) is much smaller than the size of net merchandise exports and quarterly data of services trade is still not available, we only use net merchandise exports figures in our calculations as the net exports figure.
In the first quarter of 2007, net exports contributed nearly three percentage points of GDP growth. In contrast, in the first quarter of 2008, net exports dragged down China's GDP growth by about 0.6 percentage points.
In other words, compared with the first quarter of 2007, reduced net exports left a 3.6 per cent gap in GDP growth in the Jan-March period of 2008.
To achieve GDP growth of only 1.1 percentage points lower during the quarter, our calculation shows that the growth of investment and consumption should be three percentage points higher than that of the first quarter of 2007.
But current data available barely show how it can be realised. In the first quarter of 2008, fixed asset investment, a good proxy to investment component in GDP calculation, grew by 24.6 per cent, 0.9 percentage points higher than the same period last year. But taking inflation into consideration, growth of fixed asset investment is in decline.
At the same time, China's retail data, the closest indicator available for final consumption, also sheds little light on how China's GDP growth was only dented by 1.1 percentage points.
In the first quarter of 2008, retail sales grew by 20.6 per cent, 5.7 percentage points higher than the same period last year. But given the fact that retail price index went up by 7.4 per cent, 5.3 percentage points higher than the same period in 2007, retail sales in real terms saw only slight increase during the period.
Maybe we need to find out more about China's consumption data before coming to any final conclusion.
Posted Sunday, April 27, 2008
China's inflation target hard to meet, official says
April 26, 2008
SHANGHAI - China will find it difficult to meet its target of limiting consumer price inflation to about 4.8 per cent this year, a senior official at the National Bureau of Statistics was quoted as saying.
'The 4.8 per cent figure is an aspiration, and the figures for the first quarter suggest this target will be very hard to hit,' Peng Zhilong, director general of the department of national accounts, was quoted by Saturday's official Shanghai Securities News as telling an economic seminar.
He said five factors were preventing a downturn in inflation, which surged to an annual rate of 8.0 per cent in the first quarter of 2008.
They were excessive demand caused by rapid economic growth; flows of money into China for trade, investment and speculation; rising wages; the central bank's interest rate hikes, which had raised companies' costs; and rising asset prices.
He was also quoted as saying that China's macroeconomic tightening policies and slower growth in the global economy made a slowdown in the Chinese economy this year inevitable.
But he said that it was premature to talk about the possibility of China facing stagflation, since the country would be able to maintain growth of about 9 per cent this year and inflation remained within a controllable range. -- REUTERS
Posted Sunday, April 27, 2008
Homes held back from launches in staring game
Buyers not forthcoming, so developers delay projects that are ready for market
By ARTHUR SIM
April 26, 2008
(SINGAPORE) The number of homes that could be launched for sale immediately, but have been held back, has increased to 10,239 in the first quarter of 2008, an increase of 44.2 per cent over the 7,099 units in the fourth quarter of last year. This, perhaps, is a reflection of the standoff between developers and buyers.
The Urban Redevelopment Authority's (URA) property data for the quarter also revealed that there were 2,526 homes launched, but unsold at the end of the first quarter of 2008, an increase of 22.4 per cent over the previous quarter.
CB Richard Ellis director Leonard Tay said simply: 'As homebuyers were less forthcoming, developers decided to delay their launches.'
Mr Tay highlighted that most of the new projects launched were small projects located outside the prime residential districts. 'The only project targeted at the mass market, the 405-unit Waterfront Waves at $800 psf (per square foot), met with a certain degree of success as evidenced by the 108 units sold,' he added.
According to URA, prices of private residential property increased by 3.7 per cent in Q1 2008 compared to 6.8 per cent in the previous quarter.
Mr Tay said that while there were no new luxury projects launched, a few units from existing projects were known to have been sold at above $3,300 psf in Q1 2008, with several units in Marina Collection sold at above $2,600 psf.
'These, and probably some high-priced transactions in the resale and sub-sale markets, could have contributed to the 3.7 per cent rise to the private residential price index from the previous quarter,' he added.
Interestingly, the 3.7 per cent increase in the PPI is lower than the earlier forecast of 4.2 per cent.
URA said that the last time the flash estimate of the change in private residential property price index (PPI) was revised downwards by more than 0.5 per cent points was in Q4 2001, when it was pegged downwards by 1.4 percentage points.
Jones Lang LaSalle local director and head of research (South-east Asia) Chua Yang Liang also noted that PPI was down by 3.1 percentage points from the 6.8 per cent growth recorded in Q4 2007, the biggest quarterly drop since Q3 2000, when prices declined by 4.2 percentage points.
Dr Chua said that overall, developers remained conservative on their new launches.
But while there was a significant growth in Outside Central Region (OCR) where a total of 813 units were released in the quarter - 60.5 per cent of total launches in Singapore in Q1 2008 - he noted: 'Demand in this region was however not as strong.'
Take-up rate for OCR was only 38 per cent whereas Core Central Region (CCR) and Rest of Central Region (RCR) reported healthier take-up rate of 89 per cent and 71 per cent respectively.
And Cushman & Wakefield managing director Donald Han believes buyers are prepared to wait. 'Property is sentiment-driven, and if buyers believe the economy will slow down, they will be prepared to wait it out on the sidelines,' he said.
The disappearance of speculators from the market may have also dampened sales, as reflected by the lower number of subsales at just 346 transactions, down from 649 in the previous quarter.
'Short-term speculators have been weeded out,' Mr Han said. But, as Mr Han notes, it is now also 'a smaller market'.
Savills Singapore director (marketing and business development) Ku Swee Yong also believes sub-sales have reached a plateau with current data 'reflecting true demand'.
According to Savills' own basket of properties launched and sub-sold in 2007 and 2008, the level of subsales fell from 34 transactions in Q4 2007 to just six transactions in Q1 2008. Subsale prices, however, remained stable, suggesting that panic selling for the time being at least is unlikely.
On whether the increasing backlog of unsold homes could pose a potential over-supply situation in the future, Mr Ku said that he believes not all the potential developments will be built.
URA projects that 56,501 units are expected to be completed between Q2 2008 and 2011, of which 29,685 units are already under construction.
Mr Ku said there are certain 'control mechanisms' which could see a lower number of units completed by 2011 with the first being the construction factors. Mr Ku said that a project that has not already begun construction is not likely to be finished within two years, simply because of the costs and shortages within the construction industry currently.
Another control mechanism lies with developers. 'In the previous downturn, some developers held off projects for 10 years,' he said.
Posted Sunday, April 27, 2008
Brazil suspends rice exports to contain prices
SAO PAULO, April 23 (Reuters) - Brazil temporarily suspended rice exports to safeguard domestic supply and keep prices of the basic foodstuff stable, the agriculture ministry said on Wednesday.
"Brazil is self-sufficient in rice production and there is a small amount that exceeds local demand, but in order to safeguard supply in the next six to eight months between harvests, exports are suspended," Agriculture Minister Reinhold Stephanes said in a statement.
The government also plans to sell rice from its own stockpiles in coming days "to prevent a surge in prices," the statement said. Brazil has 1.6 million tonnes of rice in government warehouses.
Brazil followed on the steps of India and Vietnam, the world's second- and third-largest rice exporters in 2007, in imposing export curbs of rice in a bid to keep prices of the grain under control. Brazil, which is not a major global rice supplier, exported 313,000 tonnes of rice last year.
Posted Sunday, April 27, 2008
Vietnam maintains rice export ban until June despite bumper crop
April 26, 2008
HANOI (AFP) - - Vietnam's government will ban new rice export contracts until June, despite a bumper harvest, to ensure food security and boost the value of the grain, state media reported Saturday.
Vietnam is the world's second largest rice exporter after Thailand, and growers have benefited from sharply rising world grain prices, even as domestic consumers have been hit hard by double-digit inflation.
Industry and Trade Deputy Minister Nguyen Thanh Bien said the export ban would be maintained despite a spring crop in the southern Mekong delta, the main rice basket, the Vietnam News Agency (VNA) reported.
The move would help to "reduce the quantity but increase the value and export revenues, while ensuring food security and serving the state's interest," Bien said, according to a VNA report in the Tin Tuc daily.
Vietnam has so far this year exported more than a million tonnes of rice, earning more than 400 million dollars, Bien was quoted as saying.
In contradictory data, the Government Statistics Office (GSO) said Friday Vietnam had exported almost 1.6 million tonnes of rice, earning 775 million dollars, in the year's first four months, boosting earnings by 73 percent.
Bien said recent shipments to the Philippines, a rice deficit country, had earned a record 1,200 dollars per tonne.
World rice prices have sky-rocketed, a trend blamed on higher energy and fertiliser costs, greater global demand, droughts, the loss of rice farmland to biofuel plantations, industry and cities, and on price speculation.
Bien predicted world rice prices may hit 1,500 dollars per tonne next month and that they will continue to rise until 2010, said the VNA report.
Vietnam's Prime Minister Nguyen Tan Dung earlier capped 2008 national rice exports at 3.5 million tonnes, down from a previous target of 4.5 million tonnes, aiming to maintain national supplies and reduce domestic inflation.
Vietnamese consumer prices, driven by higher food and energy costs, have risen by more than 17 percent in the first four months of 2008 year-on-year, fuelling popular anger and a spate of labour strikes.
The cost of rice and other grains shot up by over 25 percent year-on-year for the four-month period, the state-run GSO said Friday.
The World Bank warned this month that higher global food prices could push 100 million people in poorer developing countries further into poverty.
Posted Sunday, April 27, 2008
Thai rice export curbs would make no sense - analysts
By Apornrath Phoonphongphiphat
BANGKOK, April 25 (Reuters) - Thailand's repeated assurances it will not curb rice exports have not convinced everyone, with dogged speculation continuing abroad about Bangkok dropping what would be a rice market bombshell.
But any such move by the world's top rice exporter would make no economic or political sense, hurting Thailand's image as a reliable food supplier and alienating the new government in Bangkok's core rural supporters, analysts say.
While Vietnam, India, Cambodia and others have banned exports to prevent possible domestic shortages, Thailand has enough rice to feed its own people and keep its export commitments, they say.
"It's not logical to impose a ban. If there's any future shortage, it would likely come from hoarding by traders and exporters," Nuchjarin Panarode, an economist at Capital Nomura Securities in Bangkok, told Reuters.
Thai rice prices surged to $1,000 a tonne on Thursday, nearly three times their level in January, intensifying fears of social unrest in Asia as millions of the region's poor find themselves struggling to pay for staple goods.
Brazil became the latest country on Wednesday to suspend exports, following India and Vietnam, the world's number two and three exporters.
That has put a lot of nervous eyes on Thailand, which accounts for nearly a third of all rice traded globally.
"Neighbouring countries have been forced to restrict rice imports to contain a run-up in domestic prices. So I don't think we can rule out the possibility of Thailand doing the same," Nomura Securities economist Eli Owaki told Reuters in Tokyo.
However, senior Thai officials, from the Prime Minister down, have insisted throughout that they planned no such curbs.
A Thai delegation went to Hong Kong, a major buyer, to convey that message in person last weekend.
The latest assurance came on Friday from Finance Minister Surapong Suebwonglee, who told reporters in Singapore: "We have enough rice. We won't cut exports."
RICE PRODUCTION
Thailand produces 18-20 million tonnes of milled rice each year, of which around 9 million is consumed at home and the rest set aside for export.
It has committed to export 8.75-9.0 million tonnes this year, and repeatedly stated its ability to meet those commitments.
The United Nations' Food and Agriculture Organization (FAO) also estimates that Thai rice paddy production in 2008 will increase slightly to 30.5 million tonnes from 30.2 million in 2007, part of an overall 1.8 percent increase in global rice output.
Imposing export curbs would also be political suicide for Thailand's three-month-old, six-party coalition government, which came to power largely on the back of support from the rural population, most of whom are reliant on rice or other crops.
Soaring prices are for once offering Thai farmers, who have largely missed out on the economic boom that has swept across the country in the last 20 years, a slice of the pie.
Almost half of Thailand's 65 million people are involved in agriculture, which generates nearly 11 percent of the country's GDP.
"I believe the government will not betray farmers who voted for them by imposing any export restrictions, which would cut export demand and adversely affect domestic prices," said Paka-on Tipayatanadaja, a rice analyst at Kasikorn Research in Bangkok.
"Farmers invested a lot to grow more rice after the government said it has no plans to curb export. The government has no chance to reverse the policy now," she said.
Bangkok is also acutely aware of the damage any curbs would to its carefully cultured reputation as one of the world's key food producers.
"Thailand is a major food exporting country -- rice, poultry and fish, just to name a few -- and has worked for many years to built up a solid reputation as the 'kitchen of the world'," said FAO regional representative He Changchui.
"It is therefore in the country's longer-term strategic interest to be a trustworthy exporter, and not to temporarily ban or restrict rice exports for short-term gains," he said.
Posted Sunday, April 27, 2008
HDB flat buyers pay less cash upfront
Cash over valuation falls as units are more accurately valued to reflect market prices
By Jessica Cheam
April 27, 2008
House-hunting for soon-to-be-married Jolyn Toh used to be a discouraging affair as prices were out of her reach.
But things are looking up for the engineer.
Just six months ago, home-owners in Bukit Batok, where she is looking to buy an HDB flat, used to demand nothing less than $50,000 cash upfront.
In the last month, however, this has dipped to about $20,000 to $30,000. 'This difference means my fiance and I can now afford a home before our wedding in July,' said Ms Toh, 25.
New government figures released last Friday will bring cheer to those hunting for their dream Housing Board flat as they reveal that median cash-over-valuation (COV) prices in many popular estates like Marine Parade, Queenstown and Clementi are falling.
COV is the cash that buyers must pay a seller over and above a flat's market valuation to secure the sale. For example, if a unit is valued at $250,000 and the seller will only part with it for $300,000, the COV will be $50,000.
It cannot be paid for by a bank loan or by money from a Central Provident Fund account.
Market watchers explained that the drop in COV was due largely to valuations of HDB homes rising sharply to reflect more accurately prevailing market prices.
Valuations of flats are made by a panel of HDB-appointed private valuers.
Agency boss Albert Lu of C&H Realty said valuers have started taking into account recent resale transactions, which have enjoyed robust growth, in their valuations.
This has led to the narrowing of the gap between valuations and COV prices, even as home prices continue to rise.
Take, for example, a five-room flat in Bukit Batok. In the fourth quarter of last year, its median price was $430,000, and the median COV was $41,000. Accordingly, valuation was $389,000, that is $430,000 minus $41,000.
In the most recent quarter, the median price went up to $450,000. However, the COV fell to $30,000, which meant that the valuer had valued the flat higher at $420,000.
A lower COV will help newlyweds, especially, get on the housing ladder. They now have to fork out less cash upfront and can take out HDB or bank loans to service the rest of the purchase.
Although HDB prices continued to rise 3.7 per cent in the first quarter this year, housing experts say the market could get a boost in coming months due to lower COVs.
'With valuations going up, the COV is coming down and this makes it more affordable,' said Mr Lu.
HDB prices rose 17.4 per cent last year, the highest in a decade. At the peak of last year's spectacular property bull run - which saw record prices such as $890,000 for an executive flat in Queenstown - home-owners were asking for COV sums of more than $150,000 in some mature estates.
This, in turn, priced many newly-weds out of the resale market, who then turned out in droves to queue for new HDB flats.
In Clementi, for example, the median COV for July to September last year was a sky-high $155,000 for an executive flat. This had dropped to $75,000 in the fourth quarter last year, and is now a more reasonable $40,000 this quarter.
For a very 'cash sensitive HDB market', even a small difference in COV makes an impact and could see more people returning to the resale market, said Mr Colin Tan, Chesterton International's head (research and consultancy).
PropNex chief executive Mohamed Ismail said that another reason for the decrease in COV could be that sellers' expectations have moderated due to the recent softening of the property sector here, coupled with volatile global markets.
Mr Tan pointed out that HDB prices remained high and are daunting for lower-income families whose incomes have been stagnant. This makes new HDB flats, which are subsidised, the more attractive proposition.
But for couples like teacher Lynne Ng, 26, and her fiance, the dip in COV could not have come at a better time. 'We were going to rent or live with our parents, but now it's possible we'll get a dream home of our own when we get married,' she said.
Posted Monday, April 28, 2008
Fed may be near end of rate-cut cycle: analysts
April 27, 2008
WASHINGTON - EVEN as an economic storm intensifies, the US Federal Reserve is likely near the end of its interest rate-cutting cycle with policymakers awaiting the impact of a massive stimulus in the pipeline, analysts say.
The Federal Open Market Committee headed by chairman Ben Bernanke is widely expected to trim its federal funds rate by a quarter point to 2.0 per cent at a two-day meeting concluding Wednesday, say economists.
But some Fed-watchers say this may be the last cut for some time.
Although the economy is believed to be barrelling toward recession, a number of steps have been taken to mitigate the downturn.
The Fed has already slashed rates by three full percentage points since September, and the impact of those cuts likely will take several months to be felt in the economy.
Additionally, a US$168-billion (S$226.8 billion) economic stimulus plan approved by Congress and enacted by President George W. Bush kicks in soon with the government sending rebate checks to tens of millions of households in an effort to boost consumer spending.
In view of the stimulus in the pipeline and worries about resurgent inflation, the Fed is likely to be more cautious about additional cuts, say analysts.
Peter Berezin, global economist at Goldman Sachs, says he believes the Fed does not want to go lower than two percent, an interest rate that would provide considerable stimulus to the lagging US economy.
'We expect this to be the last cut, but the Fed will be flexible in responding to economic conditions,' Mr Berezin said.
'Obviously if the turmoil resurfaces, they will be apt to cut rates again. But barring that, they would like to stabilise rates.' Deutsche Bank economist Mustafa Chowdhury said the Fed must be concerned about destabilising effects of a further fall in the dollar that could result from more rate cuts.
'The falling dollar and rising inflation increases the likelihood that the Fed is near the end of its easing cycle,' he said in a note to clients.
Chief economist John Ryding at Bear Stearns said the Fed has widely opened up credit to the brokerage sector and banks and in doing so 'massively reduced the systemic risk of a financial meltdown.' As a result, he sees 'a significant downshifting in the pace of interest-rate reduction.' 'The US appears to have slipped into recession, which is likely to keep the Fed wanting to lean further against growth headwinds with monetary ease,' Mr Ryding said.
'However, the inflation story continues to deteriorate and, with oil almost at US$120 per barrel, the Fed's hope that falling oil prices will ease inflation pressures looks something of a remote one at the present time. In short, fears of inflation are likely to limit the Fed's generosity on the rate front and we only expect a quarter-point cut on April 30.'
Nariman Behravesh, chief economist at Global Insight, said the Fed may want to take out more insurance against an economic meltdown and offer more rate cuts, albeit at a more gradual pace.
'I think they will cut by 25 basis points and there is a chance they will cut again in June by 25 basis points,' Mr Behravesh said. 'And then they will be done.'
But some fear that data such as the past week's grim reports on the housing sector may induce the Fed to stay aggressive. Reports showed sales of new US homes plunged to their lowest level in over 16 years in March, with prices down 13 per cent year-to-year.
Rishi Sondhi, economist at RBC Financial Group, said that with housing so weak, 'the Fed will likely see the need to cut interest rates further.' 'We continue to lean towards 50 basis points coming next week followed by 25 basis points in June,' he said.
Economist Ethan Harris at Lehman Brothers said the Fed's easing cycle 'is far from over' even though the pace may slow. He expects a quarter-point cut on Wednesday and more cuts in December, January and March to bring the funds rate to a low of 1.25 per cent.
'It is true that in normal times, the 300 basis points of Fed easing thus far would be quite stimulative, adding more than three points to GDP (gross domestic product) growth in the second half of this year,' he said.
'However, these are not normal times. The only part of the policy transmission mechanism that is working is the weaker dollar helping to sustain solid export growth. The other channels of policy - market interest rates, asset prices, and bank lending - are either clogged or are working in reverse.' -- AFP
Posted Monday, April 28, 2008
Affluent Singapore feels pinch of inflation at 26-year highs
April 27, 2008
SINGAPORE (AFP) — From taking fewer taxi rides to eating out less and shortening shower time, residents of affluent Singapore are trying to cope with inflation, which has soared to 26-year highs.
Rising costs of housing, food, and transport have eaten into family budgets of Singaporeans as well as the large number of expatriates working in the city-state, consumers and analysts said.
Except for the ultra-rich, the impact of the sharp price increases has cut across social classes in one of Asia's wealthiest nations, they said.
Government figures show Singapore's annual inflation was at 6.7 percent in March, the highest since 1982, boosted by higher costs of food, transport, communications and housing.
The figure is more than double the inflation rate in Malaysia and higher than that of the Philippines, Hong Kong and Australia. Unlike bigger countries in the region, Singapore imports most of its needs.
"When the inflation rate is high, it affects everybody," said Serena, a businesswoman who lives near the prime Orchard Road shopping and would only give her first name.
Serena said even affluent families like hers have had to adjust to the rising costs by eyeing grocery prices more closely, using the car less and eating in fancy restaurants only on special occasions.
"You have to differentiate between needs and wants, what is necessary and what is not necessary. If you can get something cheaper, you don't have to go for branded (luxury) items," she told AFP.
While soaring inflation in developing countries, amid a global food crisis, has left many struggling to feed their families, Singaporeans are dealing with the impact of price hikes in their own ways.
For Janice Tan, 35, who works at a travel agency, the soaring prices have forced members of her family to shower only once a day to cut their water bill. Water used to rinse vegetables is recycled to flush the toilet.
To reduce the electric bill, Tan said she told her maid to iron only office clothes -- and just the parts that are visible.
"It's a big deal for Singapore in that we have never had inflation higher than three percent," said Euston Quah, head of the economics division at Singapore's Nanyang Technological University.
"It hits the poor badly because the poor spend maybe 40, 50 percent of their income on food," he said.
Quah sees inflation eventually easing to around 4.5 to 5.5 percent this year, while the government has forecast 2008 economic growth forecast of 4.0 to 6.0 percent.
Amin Sorr, 65, who works with a shipping firm, said life has become harder, especially for those earning less.
With a monthly salary of 3,000 Singapore dollars (2,200 US), Sorr said he can cope, but friends pulling in 2,000 dollars or less are struggling.
"I know a lot of friends who have problems with their water bills... and even personal credit lines."
Local charities say rising food prices are also driving more Singaporeans, especially poor senior citizens, to join queues for free meals.
Salamah Salim, 40, who runs a food stall on the fringes of the business district, said: "Our expenses on food and rice have more than doubled over the past year. Rice and oil have risen tremendously."
Even expatriate professionals, particularly those with less generous housing allowances and other benefits, have been hit.
As apartment rents surged, some moved their families from condominiums that come with swimming pools, gyms and barbecue pits to cheaper government-built flats without such resort-style amenities.
"They raised our rent by 150 percent after our contract expired late last year," said a Filipino computer engineer, who transferred from a gated condominium to a government-built high-rise in the suburbs.
"I know several friends who have also made similar moves or are planning to move out once their leases expire," he said, requesting anonymity.
Dee Pritchard, who works at the Australian International School, said that except for being more careful with the grocery shopping and giving the children fewer treats, nothing much has changed in her lifestyle.
"I'm lucky I'm not in the lower income (group) which would be suffering a lot more than I do really. But at the end of the week, the cash is less. There is less savings."
Posted Monday, April 28, 2008
Police say Austrian man raped daughter, fathered 6 children
By VERONIKA OLEKSYN
April 28, 2008
VIENNA, Austria - A woman who went missing in 1984 was found by police over the weekend and told investigators that she had been held by her father in a cellar, where she was repeatedly raped and gave birth to at least six children, police said Sunday.
Authorities said that the father may have told acquaintances and relatives that his daughter had joined a cult and disappeared.
Franz Polzer, head of the Lower Austrian Bureau of Criminal Affairs, told reporters that the father, identified as Josef F., had been taken into custody. Police said Josef and his wife had been raising three of their daughter's children. The other three grew up in the cellar.
"We are being confronted with an unfathomable crime," Interior Minister Guenther Platter said.
The case unfolded after a gravely ill teenager was taken around April 19 to a hospital in the town of Amstetten, where she was found unconscious in the building where her grandparents live, police said. Told that the sick 19-year-old's mother was missing, authorities publicly appealed for her to come forward.
Officers received a tip and picked up the mother near the hospital on Saturday, police said.
The mother, whom authorities identified as Elisabeth F., told officers that she had just been released after two decades of captivity at the hands of her father. She said that on Aug. 28, 1984 her father had sedated her, handcuffed her and locked her in a room in the cellar of the family's apartment building.
In an interview with AP Television News, Polzer said that Josef F. had given police a code to unlock a hidden door, revealing the area where Elisabeth and the children had been held.
It had "several" rooms, an uneven floor and a "very narrow" hallway, Polzer said, adding that the door was "very small," and that one had to bend one's head to get through.
"Everything is very, very narrow and the victim herself ... told us that this was being continually enlarged over the years," Polzer said.
The area also contained sanitary facilities and "small hot plates" for cooking, Polzer said.
On its Web site, ORF reported that the rooms were at most 5.6 feet high and that the area had a TV.
The area also included a "padded cell," Hans-Heinz Lenze, a senior Amstetten district official, said in remarks broadcast late Sunday.
Elisabeth said her father had been sexually abusing her since she was 11. According to the police statement, Elisabeth said that she and her children got food and clothing only from her father and her mother, Rosemarie, had not been involved.
Police said Elisabeth F. appeared "greatly disturbed" during questioning and agreed to talk only after authorities assured her she would no longer have to have contact with her father and that her children would be cared for.
Police said Josef, 73, and Rosemarie had raised three of Elisabeth's children in their apartment in a two-story building in Amstetten, a small town about 80 miles west of Vienna.
Josef and Rosemarie registered the children with authorities, saying that they had found them outside their home in 1993, 1994 and 1997, at least one with a note from Elisabeth saying she could not care for the child.
The three other children apparently remained in the cellar with Elisabeth, police said.
"Elisabeth F. taught them how to speak," Polzer was quoted as saying by the Austria Press Agency.
Police said the sick 19-year-old, Kerstin, had been found unconscious on April 19 in the apartment building, with a handwritten note purportedly signed by Elisabeth, asking that she be given care.
After Kerstin was hospitalized, police said, Josef F. freed Elisabeth and the two remaining children from the cellar and told his wife that their daughter and the children had come back to them.
The Austria Press Agency reported that, in addition to Kerstin, three of the children are boys and two are girls, the youngest of whom is 5.
All are in psychiatric care, along with Elisabeth and Rosemarie, police said. DNA tests are expected to determine whether Josef F. is the father.
Police cited Elisabeth as saying that she gave birth to twins in 1996 but one died several days later because it was not properly cared for, according to police, who said they are investigating.
Josef, the alleged abuser, then apparently removed the corpse from the cellar and burned it, the police statement said. It was not immediately clear if the twin who allegedly died was included in the police total of six children.
Sunday's developments are reminiscent of the case of Natascha Kampusch, which shocked Austrians less than two years ago.
Kampusch was 10 years old when she was kidnapped in Vienna on her way to school in March 1998. She was held for the next 8 1/2 years by Wolfgang Priklopil, who largely confined her to a tiny underground dungeon in his home in a quiet Vienna suburb. Priklopil threw himself in front of a train just hours after Kampusch's dramatic escape on Aug. 23, 2006.
Posted Monday, April 28, 2008
More panic buying expected as refinery strike continues
April 28, 2008
GRANGEMOUTH, Scotland (AFP) - More panic-buying of petrol was expected Monday, the second day of a 48-hour strike at a major refinery that has forced the country to shut down a North Sea pipeline.
The walk-out by around 1,200 workers at the Grangemouth refinery, west of Edinburgh, forced the neighbouring Forties pipeline, which supplies 40 percent of Britain's oil and gas, to close down, operator BP said.
Offshore energy industry body Oil and Gas UK has estimated that the pipeline closure will cost the British economy 50 million pounds (65 million euros, 100 million dollars) per day in lost production.
It has urged politicians to intervene in the dispute over a pensions row.
Business Secretary John Hutton said the government had made "every effort" to prevent the action taking place, particularly the closure of the pipeline.
"What the government's responsibility is, is not to take sides in this dispute," he told BBC TV.
"I think it's (the strike) not justifiable, I think we're bringing into this parties who are innocent bystanders."
The pipeline brings more than 700,000 barrels of crude oil ashore every day and supplies the local and international markets. It cannot function without power and steam from Grangemouth.
Staff and families held a demonstration Sunday outside the refinery, which experts have said could take weeks to get back to full operational capacity.
Grangemouth oil workers have also taken out advertisements in Scottish newspapers to explain their position to the public in a bid to appeal for support.
Despite assurances from the government that sufficient supplies were being shipped in, many motorists, particularly in Scotland and northern England, rushed to pumps to stock up on Sunday.
Some petrol stations were forced to introduce rationing or raise prices while others ran dry.
The Scottish government is shipping around 65,000 tonnes of fuel -- mostly diesel -- in from Europe to bolster supplies during the action, which should be enough to last about 10 days.
Alan Duncan, the Conservative industry spokesman, warned that the closure would hit world oil prices.
"The interdependence of our North Sea oil production and the refinery... has implications for global oil prices," he told Sky News television.
"So world oil prices have gone up and we're going to see local oil prices and petrol prices going up."
On Friday in London, Brent North Sea crude for June rose two dollars to 116.34 a barrel after earlier crossing the key 117 dollar mark.
Some 70 oil fields feed into the Forties pipeline. Around two-thirds of oil from it is immediately exported.
It is the first time in more than 70 years that a British refinery has been shut down due to a strike.
The dispute comes at an awkward time for Prime Minister Gordon Brown, ahead of local elections on Thursday in which opinion polls suggest his Labour Party could struggle.
Posted Monday, April 28, 2008
Investors pull out of mutual funds
By Deborah Brewster
27 April 2008
All but one of the 25 largest US mutual fund managers saw their long-term assets fall in the first quarter, as returns dived and investors pulled out of funds.
In the worst start to a year for more than a decade, most money managers had retail outflows, and even stalwarts such as American Funds and Vanguard suffered a drop in assets, of 6.6 per cent and 4.3 per cent respectively.
Pimco, the bond manager, was the only one to show a rise in retail assets, according to Financial Research Corporation and industry estimates. Pimco’s Total Return fund had an inflow of $9bn in the three months to March.
The trend is likely to worry economists, because it suggests the credit turmoil is hurting the confidence of mainstream investors. That, in turn, could dampen activity among consumers in the months ahead, since falling investment sentiment is often associated with muted household spending levels.
However, the fall also marks a fresh blow for the financial industry, because mutual fund managers typically make money by charging a percentage of assets – meaning that profits in the industry fall when assets decline.
Last week, a group of publicly traded asset managers announced bleak quarterly results. Affiliated Managers Group, which holds stakes in 26 mutual and hedge fund companies, reported a quarterly profit fall for the first time in five years, with outflows of $8.4bn in the quarter.
Big institutional fund groups – such as AllianceBernstein, a unit of French insurance group Axa – likewise showed asset falls.
One senior industry executive said: “This is the worst I have seen for a long time, the industry-wide outflows, and unfortunately I don’t think it is a short-term situation. The days of domestic [US] equity funds driving profits for us, that could be gone.”
Retail and institutional investors pulled $100bn from US, European and Japanese equity funds during the quarter, according to Strategic Insight.
The trend is accelerating a shift in the money management industry, as investors move away from equity funds, which have been the industry’s profit mainstay, towards either low-margin options such as short-term cash and indexed funds, or high- margin alternative investments such as hedge funds, private equity and hard assets.
Long-term assets do not include money market funds, which have seen big inflows. Several money managers, such as Fidelity, have large money market funds which are offsetting their outflows, although money market funds are low-margin products and do not provide long-term investor loyalty. Fidelity had a drop of long-term assets of close to 10 per cent for the quarter, as investors continued to pull funds from the former market leader despite a lift in performance in its funds.
Posted Monday, April 28, 2008
WORLD: SEEKING FOOD SECURITY IN AN UNCERTAIN WORLD
By Breffni O'Rourke
4/25/08
The future arrived more quickly than anyone expected.
Starting in the 1960s, environmentalists warned that the world was about to run out of food as populations grew and agricultural land was exhausted.
But then came the Green Revolution, that period when yields were multiplied by scientific growing methods, and the old, pessimistic predictions were largely forgotten.
These fears have returned, however. Population growth, coupled with rising consumption habits, climate change, and higher production costs have sent food prices soaring. The UN Food and Agriculture Organisation (FAO) says its food price index rose by 40 percent in 2007 -- and it’s still going up.
In the same year, supply tightened significantly. World wheat reserves fell from 18 to 12 weeks, and corn from 11 to eight weeks.
One reaction among grain-producing countries has been to ban exports so that their own populations are not exposed to shortages. One country which has just done that is Kazakhstan, Central Asia’s biggest wheat exporter. Its ban threatens supplies to neighbors Kyrgyzstan, Tajikistan, and Azerbaijan.
"Food exporters are facing this problem and are cutting off their exports and are making it very hard for other countries, whether it’s a country like the Philippines or an organization like [the World Food Program] to buy in the open market," the World Food Program’s Asia director, Tony Banbury, said on April 22 of the combined impact of such export bans. "Right now we cannot buy the wheat we need for Afghanistan with the $78 million donors have given us. We simply can’t get it. And it’s the same in East Timor right now; they can’t buy the food they need -- rice -- on the commercial markets."
FAO food reserves expert Abdolreza Abbassian tells RFE/RL from Rome that accumulation of stocks may superficially seem a good thing. Once acquired, reserves can be used to help stabilize prices. Exporting countries in the past used them as a buffer against unexpected changes in production anywhere in the world, contributing to more stability in prices.
But he also noted a downside: Imagine the impact on the market of many countries trying to acquire reserves at the same time.
"The problem we have today is that if more countries, especially importing countries, decide that keeping large stocks is the way forward for preventing [price] developments such as we have seen in recent weeks and months, well, keeping stocks has an economic cost, and in economic terms, its not a very efficient way of protecting yourself," Abbassian says.
EU Trade Commissioner Peter Mandelson came out strongly against national hoarding practices in comments in Tokyo on April 23. "If we restrict trade, we’re simply going to add food scarcity to the already large problems of food shortages that exist in different countries," Mandelson said.
Abassian points out that nobody is carrying big reserves as they did in past decades, when farm policies for instance in North America and the European Union encouraged maximum production, and silos were full of stored -- unwanted -- grain.
He says the tendency in the developed world has been rather the reverse.
"If you’re talking about cereals, a lot of developing countries actually do have a more sophisticated stocks policy and reserves policy than many developed countries, for a very simple reason: the developed countries have a more developed [crop] return and production system, and usually do not import food, and there is a tendency to keep reserves at the ’pipeline’ [minimum] level," Abassian says.
Abbassian says the present surge in prices may lead to a reassessment of whether greater stockpiles of basic foods are needed once again, or whether some new form of risk management, using for instance an exchange scheme as a sort of insurance policy, could be developed between countries.
He says he does not share the view that food is itself genuinely scarce, even though its distribution is uneven. What is needed is a proper trade regime which will prevent countries from resorting to distorting methods, such as food export bans.
Posted Monday, April 28, 2008
U Launch - Prime Minister Lee Hsien Loong launches the new NTUC logo on 27 April 2008.
Posted Monday, April 28, 2008
Oil Rises to Record on U.K. Pipeline Shutdown, Nigeria Attack
By Christian Schmollinger and Gavin Evans
April 28 (Bloomberg) -- Crude oil rose to a record, trading near $120 a barrel in New York, after BP Plc shut a North Sea pipeline and gunmen attacked police guarding Nigeria's largest oil and gas terminal.
BP closed the Forties Pipeline System, carrying 40 percent of the U.K.'s oil production, after a strike at the Grangemouth refinery cut power supplies. Five police were killed in yesterday's attack in the Niger Delta, where output has dropped by 50 percent since April 25, adding to concern about supplies before the Northern Hemisphere summer driving season.
"The bulls are still in control so it's no surprise to be near $120 on these supply concerns," said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. "Nigeria is back on top of traders' minds. The disruptions are real and this is high-quality crude needed by the U.S. refineries for gasoline production in the summer."
Crude oil for June delivery rose as much as $1.41, or 1.2 percent, to $119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $119.44 at 3:05 p.m. in Singapore. Prices have surged 82 percent in the past year.
The contract jumped 2.1 percent to $118.52 a barrel April 25 when the refinery strike and pipeline closure were announced.
New York oil futures are 82 percent higher than a year ago. Investors have purchased contracts as a hedge against the dollar as it has fallen to a record low against the euro and as an alternative to flagging equities markets. The benchmark U.S. S&P 500 Index has dropped 9.8 percent since the start of the year.
'Substantial Production'
"The production affected at the moment is pretty substantial," said David Moore, the commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. "It all counts nowadays. The price would suggest the market is very tight."
Oil for delivery in June is selling at a premium of $1.04 a barrel to July supplies. The price difference becomes more pronounced for later month contracts as June's premium to the December future has jumped to $4.80 a barrel.
Brent crude for June settlement rose as much as $1.16, or 1 percent, to $117.50 a barrel London's ICE Futures Europe exchange and was trading at $117.36 a barrel at 3:05 p.m. in Singapore. It reached a record $117.56 on April 25.
Refinery production at Grangemouth will resume on April 29 at 7 a.m. local time. Units crucial to restart flows on the Forties pipeline will have priority, Richard Longden, spokesman for operator Ineos Group Holdings Plc, said yesterday.
Low-Sulfur Grades
Oil grades from the North Sea and Nigeria, Africa's biggest producer, are low in sulfur and favored by refiners. Nigeria is losing about 50 percent of its output after staff at Exxon Mobil Corp.'s operations went on strike April 24 and militants attacked a Royal Dutch Shell Plc pipeline later the same day.
"Nigerian crude is quite good quality and the U.S. probably imports about 10 percent to 15 percent from them," said Tetsu Emori, a fund manager at Astmax Ltd. in Tokyo. "It's affecting the supply and the quality" for the refiners.
Nigeria pumped 1.96 million barrels a day in March, according to Bloomberg estimates. Recent attacks on Shell-run pipelines, including the latest one, are cutting oil flows by about 140,000 barrels a day, the country's oil minister H. Odein Ajumogobia said April 25. The Exxon Mobil strike is halting about 765,000 barrels a day, according to union estimates.
The loss of production in the North Sea and Nigeria follows reports of output declines in Russia and Mexico, two of the biggest suppliers that aren't members of the Organization of Petroleum Exporting Countries.
'New Supply Problems'
"On top of everything in the U.K. and everything in Nigeria, it seems like everyday we're having new supply problems," Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore, said in an interview with Bloomberg Television. "It's political, it's supply. Everyday there's something pushing prices higher."
Hedge fund managers and other large speculators increased bets on rising oil prices for a third time in the week ended April 22, according to data from U.S. Commodity Futures Trading Commission.
Speculative long positions, or bets prices will rise, outnumbered short positions by 70,562 contracts, a 6 percent gain, the Washington-based commission said in its Commitments of Traders report. This is the highest since the week ended March 21.
Oil prices are likely to fall to "more realistic levels" once the Forties pipeline has re-opened, said Ben Barber, a broker at Bell Commodities Ltd. in Melbourne. U.S. stockpiles and the dollar are rising and there is a risk prices will decline this week if the Federal Reserve signals an end to recent interest rate cuts.
"Oil is quite susceptible," he said.
The Federal Reserve will probably cut its target lending rate by a quarter-point to 2 percent on April 30, according to futures traded on the Chicago Board of Trade, the smallest reduction in four months.
Posted Monday, April 28, 2008
PREVIEW - Market turmoil to hurt Singapore, Malaysia bank profits
* What: Singapore banks' Q1 earnings, Malaysia's Maybank's Q2, Bumiputra-Commerce's Q1
* When: Singapore (May 6-7), Malaysia (mid-May)
* Loan growth still strong, volatile markets hit fees
By Saeed Azhar
SINGAPORE, April 28 (Reuters) - Most Singaporean and Malaysian banks could see profits hurt by faltering capital markets and lower fees, with Southeast Asia's top bank DBS expected to report more writedowns linked to the global credit crisis.
However, strong loan growth, fueled by financing for multi-billion dollar projects such as Singapore's two casino resorts, likely prevented larger profit declines in the last quarter.
Analysts warn more difficulties lie ahead in the second half when a looming U.S. recession catches up with Asia's robust economies, putting a brake on earnings momentum.
Singapore's DBS is likely to report next week that its quarterly profit declined by 8.3 percent from a year earlier to S$566 million ($416 million), according to the average forecast from a Reuters poll of six analysts.
Analysts expect DBS to report lower fees and fresh provisions on its exposure to complex credit derivatives.
But the writedowns would be much lower than last year when it wrote down S$270 million on structured instruments, including debt exposed to the collapsing U.S. subprime mortgage market.
The bank, whose new Chief Executive Richard Stanley will take charge in early May, said in January it would take $86 million in provisions in the first quarter on a special investment vehicle that was divided up into riskier and less risky debt instruments.
Credit Suisse said that the bank had written off 90 percent of its asset-backed collateralised debt obligations last year, but the coverage on corporate CDOs was low while it was also exposed to the volatile credit default swaps market.
Shares of global financial firms tumbled in the last quarter on fears of more credit-related writedowns, with DBS stock losing 13 percent.
Other Singapore banks, United Overseas Bank and Oversea-Chinese Banking Corp may escape with minor writedowns after taking big hits last year, while Malaysian banks had no exposure to U.S. subprime mortgage debt.
Most Southeast Asian banks still face lower fees from investment banking.
"Investment banking activities have slowed, market activities have slowed, I think that will weigh on their performance this year," Citigroup banking analyst Julian Chua said.
However, loan growth remains buoyant as other avenues of financing such as capital markets wilt under the global turmoil.
"Banks are the only game in town if you want to borrow money because cross-border capital markets are not functioning," said Deborah Schuler, senior vice regional credit officer of Moody's Investor Service in Singapore.
Loans grew at a 22 percent pace in Jan-Feb from a year earlier in Singapore, rose 8.2 percent in Thailand in the first two months of the year on improved confidence after a new government took power and were up 9.6 percent in Malaysia.
Schuler said that the impact of a slowing U.S. economy may be felt in the second half of the year and could hit economies which have strong global trade links such as Singapore.
SINGAPORE LOANS
Analysts said Singapore's loan growth in the first two months of the year was not sustainable and could fall short of the 20 percent expansion last year.
"But there is sufficient latent credit demand to drive growth of 12-13 percent year-on-year -- levels unlikely to be seen across the rest of Asia," said Thilan Wickramasinghe, an analyst at CLSA in a note to clients.
But analysts said margins could suffer as domestic interest rates track U.S. money markets, where the Federal Reserve has aggressively cut its benchmark rates, pushing down bond yields.
Three-month interbank lending rates fell to a low of 1.375 percent at the end of March, compared to close to 2.4 percent at start of the year and almost 3 percent a year ago.
Malaysia's biggest lender, Malayan Banking Bhd, which reported net profit of 755 million ringgit ($239 million) for the quarter to March 2007, faces stiff competition in mortgages and car loans, but would benefit from low bad debt charges, Citigroup's Chua said.
Malaysian analysts do not provide quarterly forecasts.
Second-largest lender Bumiputra-Commerce could see earnings fall this year amid a slowdown in investment banking, which contributes up to 30 percent of its gross income, Chua said.
SINGAPORE - FORECAST Q1 NET PROFIT AVG (S$ mln)
Q1 2008 CHANGE (PCT) VS Q1 2007 ANALYSTS
DBS 566 - 8.3 617 6
UOB 522 0.77 518 6 * OCBC 456 - 29.5 647 6 (Based on a Reuters poll) (*OCBC's Q1 2007 result included a S$137 million gain from sale of asset and tax refund)
MALAYSIA FULL YEAR FORECAST($ bln ringgit)
2008 CHANGE (PCT) VS 2007 ANALYSTS * MAYBANK 3.35 bln 5.4 3.178 bln 18
BUMIPUTRA 2.78 bln -0.4 2.79 bln 18 (* Maybank's reporting period is July-June) (Data based on Reuters Estimates) (Additional reporting by Clarence Fernandez in Kuala Lumpur; Editing by Jan Dahinten & Kim Coghill)
Posted Monday, April 28, 2008
Turning point for Taiwan's relations with China
By Howard Winn
28 April 2008
Expect Taiwan to forge closer ties with China now that Ma Ying-jeou is president – and that should lead to an economic boom.
Many Taiwanese have long felt they have missed out on the benefits of China’s economic boom even though the mainland is Taiwan’s biggest trading partner. But now that Ma Ying-jeou has been elected president there is considerable optimism that a turning point has been reached, since he favours easing tensions with China. If all goes well, that should spur a recovery for Taiwan’s lagging economy.
“It’s great news for us and will lead to a change in cross-strait relations,” says Susie Chiang chairman of the CS Culture Foundation, a private sector think-tank based in Hong Kong. “Ma is promoting a more open-door policy towards China, which will lead to better business relations. This is why everyone is so optimistic.”
Taiwan and China have been ruled separately since 1949 when the Chinese Communist Party took control in China and Chiang Kai-shek’s Kuomintang government fled to the island. After 55 years of rule by the Kuomintang, Taiwan’s first presidential election was held in 1996 followed by the first parliamentary elections in 2000, which Chen Shui-bian’s party handily won.
Over the past eight years, under Chen Shui-bian’s presidency, cross-strait relations were uneasy and often acrimonious. Chen’s pro-independence Democratic Progressive Party’s (DPP) position has irked the US, Taiwan’s staunchest ally, and China, which claims sovereignty over the island. Indeed, China has threatened to invade Taiwan if it attempts to formalise independence. Chen’s obsession with the Taiwanese identity issue, analysts say, led to the neglect of the economy, although he also had to contend with a legislature that was dominated by the Kuomintang, which fought both him and his reform efforts.
Although Taiwan’s technology sector has flourished and maintained its market dominance, manufacturers have moved to their production to China and domestic investment has declined. Taiwanese manufacturers have invested roughly $300 billion in the mainland during the past 15 years, which makes Taiwan one of the largest sources of foreign direct investment in China. During the same time, funds that have gone offshore in search of higher yields outside of Taiwan have not returned to the island.
While the headline number still looks good – Taiwan’s economy grew 5.7% in 2007 – household incomes are at a record low level having only risen a miserly 3.5% since 2000 and property prices have been flat. Indeed, Taiwan’s property prices have consistently underperformed those in other Asian economies since the early 1990s.
Missed opportunities
The Taiwanese blame uneasy cross-strait relations for the weak economy. In an attempt to prevent Taiwan from becoming overly dependent on the mainland, Taiwan has imposed restrictions, which have unintentionally backfired on the economy.
Grace Ng, an economist with JPMorgan, points out that although companies’ investments in the mainland have been restricted to 40% of their capital, this has not deterred mainland investment. But it has discouraged the repatriation of profits since manufacturers worry that they may not be able to use the funds for further expansion in China. At the same time, companies that want to raise money to expand in China have been reluctant to list in Taiwan. Many prefer Hong Kong or Singapore.
Individual investors wanting to invest in the China story have also had to move offshore since the government has forbidden the sale of mutual funds in Taiwan that invest more than a small portion of the funds in mainland companies. While other Asian companies have benefited from the huge outflow of Chinese tourists, Taiwan has the lowest number of tourist arrivals in East Asia. It has only recently permitted entry to mainland package tours. And it bans direct transport links with China for security reasons. This means that a trip between Taipei and Shanghai that should take an hour, takes nearly a full work day since travellers have to pass through Hong Kong or other third countries.
New beginnings
After lagging most stock markets over the past few years, Taiwan’s bourse has been the best performing in the region this year, rising 8% while most others are down by more than 10%. Although China has not commented on the election result, it has indicated that it is prepared to talk to anyone not actively seeking formal independence for Taiwan.
Ma, who will not formally assume office until May 20, said during the campaign that weekend charter flights to China would be in place by July and he proposed making it easier for mainland tourists to visit Taiwan. He is also proposing to eliminate the 40% investment rule cap into China while permitting mainland investments into Taiwan.
“If these four things happen, there will be a massive economic boom particularly in Taipei,” says Peter Sutton, head of research for CLSA in Taipei.
He adds that closer links will see the development of Taipei as a service centre for Greater China, as many of the 2 million Taiwanese currently living in mainland cities would likely return to live in Taiwan as a result of the resumption of direct flights. At the same time, closer links could lead to significant corporate investment in Taiwan. There is also likely to be a jump in private consumption spending “as consumer sentiment and overall confidence on the medium-term outlook for the economy gradually recovers,” says JPMorgan’s Ng.
The consensus among economists for gross domestic product growth in 2008 is 4.3%. However, UBS is more circumspect and is forecasting growth of 3.5% due to slowing world demand, which it says will impact domestic consumption.
“We don’t expect the presidential election to have a major impact on the domestic economy in 2008. While a more mainland-friendly government may boost investor sentiment and perhaps increase mainland tourist flows, concrete agreements with Beijing that will increase economic growth significantly will take longer to materialise than 2008,” says Sean Yakota, an economist with UBS.
The economy was the central issue in the election with DPP candidate Frank Hsieh adopting a more pragmatic attitude than President Chen. Both Ma and Hsieh favoured relaxing cross-strait economic links although they differed on the speed and degree of opening up relations. Yet, the shift in Taiwan public opinion, a trend accelerated by President Chen, has meant that no Taiwanese politician can now hope to get elected by declaring himself in favour of reunification with China.
For many years this has been the formal position of Ma’s Kuomintang party, though in the months preceding the election Ma backed away from this position. He said he was against reunification, but also against a formal declaration of independence. Ma has also sought to differentiate himself from the old-style Kuomintang political machine by criticising China’s human rights record and promising to fight corruption. He has condemned China’s recent crackdown in Tibet and has even threatened to boycott the Beijing Olympics because of the issue.
So where does this leave China’s long-held quest for Taiwan’s reunification? “For the moment people are focusing on economic ties with China. We are not talking about reunification at the moment. There is a long way to go before we can talk about that,” says Susie Chiang.
Posted Monday, April 28, 2008
Palm oil futures fall
KUALA LUMPUR, April 25: Malaysian crude palm oil futures fell 1.2 pc on Friday as dismal export data from cargo surveyors heightened fears of a slowdown in demand amid worries of a possible cut in Indonesian export taxes.
Palm oil prices, which have fallen around 24 per cent from record highs last month, were expected to head lower in coming weeks on ringgit strength and a higher production cycle, traders said.
The benchmark July contract settled down 41 ringgit to 3,419 ringgit ($1,084) per ton after going as low as 3,388 ringgit. Other traded months fell between 32 and 103 ringgit.
Traders said a high possibility Indonesia would reduce export taxes of palm oil to 15 per cent in May from 20 per cent ignited fears that any new orders for palm cargoes would be meant for Indonesia rather than Malaysia.
Apart from sluggish demand, Malaysia is undergoing a higher production cycle, with an analyst forecasting output in April would likely rise 5pc from last month on the back of widespread rains.
Malaysia's crude palm oil output is expected to rise to 16.5 million tons this year from 15.8 million tons in 2007 as soaring palm oil prices have led to conversion of marginal land into plantations, the country's commodities minister said on Thursday.
Indonesia and Malaysia are still committed to allocating a maximum 6 million tons of crude palm oil for biodiesel, although it will take years to meet the commitment, agriculture officials from both countries said on Friday.
In Malaysia's physical market, crude palm oil for April shipment in the southern region was quoted at 3,385/3,400 ringgit a ton. Trades were done at 3,400 ringgit. - Reuters
*********************************************************************************
UOB KayHian: -
UK calls for review of EU biofuel target
CPO prices are losing strength and their correlation with crude oil prices.
Despite the recent run-up in crude oil prices to a new high of US$119.37/bbl on 22 Apr 08, CPO prices remain flat with a slight downward trend.
Several developments are derailing the CPO price momentum:-
1. UK to rethink biofuel target.
UK prime minister Gordon Brown said the country could push for a change in the EU target to increase the proportion of biofuel to 10% of road fuels by 2020 (up from 2.5% currently, 5% by 2010). The call for review is sparked by rising concern that the target is contributing to food shortages.
2. Higher CPO production for 2008.
1Q08 CPO production was 16.9% above expectation, reflecting a stronger-than-expected yield recovery. According to industry sources, 2008 production for Malaysia could easily amount to 10% (17.8-18.0m tonnes) above official forecast of 16.2m tonnes (2007: 15.8m tonnes).
3. Higher rainfall in Indonesia will promote recovery in yields. According to the latest Oil World report, rainfall in Indonesia was favourable and the higher humidity level will promote a recovery in yields and sharply higher palm oil production in Indonesia in 2008 and 2009.
Although the European Commission (EC) has been defending its biofuel target and has denied considering a change in the target, in our opinion, there is a high possibility given the rising concern over the worsening food shortage. We also foresee growing pressure to revise future biofuel targets.
In a previous report, we highlighted that the EC is now more open to discussion of the biofuel target. Any early indication or announcement that biofuel mandates are to be reviewed would drag down vegetable oil prices.
Besides the potential change in global biofuel policies, prolonged high vegetable oil prices could trigger the following developments, which would in turn cap the upside for vegetable oil prices:
a) Rising global inflationary pressures could weaken demand,
b) More liberal government policies in importing and exporting markets, and
c) The possibility of reintroduction of windfall tax, or increase or extension of cooking oil cess in Malaysia.
We foresee more downside risk to the current high CPO prices and stock prices (high valuations). We do not see any strong catalyst that could change our UNDERWEIGHT call for the sector.
Posted Monday, April 28, 2008
Inflation jumps in India
April 26, 2008
NEW DELHI (AFP) - - India's inflation jumped again to a more than three-year high, according to data on Friday, days ahead of a key meeting of central bankers who are expected to tighten monetary policy further.
Annual inflation accelerated nearly two-tenths of a percentage point to 7.33 percent for the week ended April 12, driven partly by higher food costs.
High inflation has become a central political issue in India with taming prices the key goal of the Congress-led government, which faces general elections within a year and a clutch of state polls in between.
India's hundreds of millions of poor, whose support is vital at voting time, have been hit hardest by the inflation surge.
The latest jump, which comes amid soaring global commodity costs, was up from 7.14 percent the previous week according to the Wholesale Price Index, the most watched cost monitor.
Posted Monday, April 28, 2008
Bubble or fact of life: Where's the price of oil headed?
John Porretto
27 April 2008
HOUSTON (AP) -- Oil's meteoric rise to near $120 a barrel looks like more than just another economic bubble -- growing demand and tighter supplies are likely to keep prices high. Some analysts say even $200 a barrel would not be out of the question.
The latest price surge -- pushing crude to record heights in recent weeks, and to nearly double its level a year ago -- has some key components of a classic bubble, when market prices climb far above their intrinsic value. The burst comes when investors realize the assets are overvalued.
But growing worldwide thirst for crude, in large part from the rapidly developing economies of China and India, means frustrated consumers probably won't get any relief.
"We can do our homework, but prices are going to go where they want to go at this point," said Jeff Spittel, an analyst at investment bank Natixis Bleichroeder Inc.
Americans who hoped to ride out temporarily high prices by carpooling or driving less may have to make those habits permanent. And because of the premium prices, oil companies may be willing to search out more oil in places they previously couldn't afford to explore.
Oil came close to $120 a barrel Friday on news that a ship under contract to the U.S. Defense Department fired warning shots at two boats in the Persian Gulf that may have been Iranian. The markets were also weighing the effects of a pipeline attack in Nigeria and a looming refinery strike in Scotland.
Retail gas prices, which at times rise in tandem with crude oil, moved further into record territory near $3.60 a gallon.
The Organization of Petroleum Exporting Countries -- which supplies about 40 percent of the world's crude -- insists it's supplying more than enough oil.
Instead, many observers blame speculative traders for bidding up the price as a hedge against inflation and as protection from the sinking U.S. dollar. Some see that as evidence of a bubble.
It's also becoming harder and more expensive for oil companies to find and tap new petroleum reserves -- a troublesome scenario given forecasts that the world's energy needs will escalate by more than 50 percent in the next two decades.
Toss in the weak dollar and political instability in some oil-producing countries, and it seems unlikely that oil will fall below $100 a barrel anytime soon, if ever.
Widely watched oil price prognosticator Goldman Sachs has said oil could average $110 a barrel by 2010, up from a previous forecast of $80, and that a spike as high as $200 a barrel is possible in case of a major supply disruption.
Supply is at the heart of soaring prices, said John Moroney, a Texas A&M economics professor who just finished a book on energy production and consumption. He cites production declines in Mexico, an unstable oil industry in Venezuela and possible shrinking production capacity in the Middle East.
"I don't buy the bubble theory," he said.
Many analysts believe the weakness of the dollar is a bigger factor than supply and demand because the soft dollar draws investors worried about inflation into commodities such as oil and gold.
It also makes commodities less expensive for buyers operating in other currencies. Many investors see the dollar only heading lower if the Federal Reserve keeps cutting interest rates, which most analyst still expect it to do next week.
Some market-watchers say oil will probably keep rising until demand falls off, which they describe as the market's way of finding fair value for the commodity. For oil, some estimate that price as low as $60 or $70 a barrel.
"The fundamentals don't justify anywhere near these prices, even when you factor in geopolitical problems," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Cambridge, Mass.
He expects prices to fall as low as $80 this year and perhaps as low as $50 in the next three or four years as more global supply comes on line.
Demand already has begun to wane in the U.S., where fuel prices are causing turmoil in an economy already saddled with recession fears, a housing and credit crisis, and dismal retail sales.
Drivers have begun to cut back on gasoline consumption. Some people have taken to riding bikes to work or organizing car pools. The sale of gas-electric hybrid vehicles is up. Larger trucks and sport utility vehicles are selling slowly.
It's unclear how much a drop in oil prices could reduce gasoline prices. The prices do not always move together because they are subject to separate supply and demand forces. While oil prices have risen 80 percent in a year, gas prices climbed only 24 percent.
Trying to predict where prices are headed has devolved into a guessing game, some analysts said.
Two weeks ago, the Energy Department acknowledged "significant uncertainty" in its oil price projections, noting the threat of supply disruptions in oil-producing nations, unusual weather or refinery outages.
The major oil companies began reporting earnings for the first three months of the year this week, with ConocoPhillips saying it earned more than $4 billion, up 17 percent from a year ago. Exxon Mobil Corp. and Chevron Corp. are scheduled to report earnings Thursday and Friday.
The higher prices have allowed companies to extract oil from sources too expensive to tap only a few years ago, like the Canadian oil sands and deepwater sites in the Gulf of Mexico, said Gary Adams, who heads the U.S. oil and gas practice for Deloitte & Touche USA LLP. He expects the price of oil to settle at around $90 to $100 a barrel in the coming months.
Even if oil prices fall back to $60 or $70 a barrel, "the capacity of those businesses to do well and fund major projects will continue," said analyst Bernard Picchi of securities firm Wall Street Access. "These are great storehouses of value, and I don't think anyone can take that from them right now."
Posted Monday, April 28, 2008
Tax rebates start showing up in bank accounts Monday
By MARTIN CRUTSINGER
April 29, 2008
WASHINGTON - The government started depositing thousands of rebate checks in taxpayers' bank accounts on Monday, earlier than originally scheduled, with the Bush administration hoping the payments will give a jump-start to a weak economy.
The Internal Revenue Service started making the deposits at 8:30 a.m. EDT Monday with the goal of completing 800,000 direct deposits each day over the first three days of this week. No deposits will be made Thursday while the IRS prepares a big batch of 5 million direct deposits scheduled on Friday.
The government's paper checks will start going out on May 9, a week earlier than previously announced. The rebates, which are expected to reach 130 million households, range up to $600 for an individual and $1,200 for a couple. Families with children will get $300 per child.
The rebates were the centerpiece of the government's $168 billion economic stimulus package enacted in February and are designed to bolster consumer spending and lift the economy out of the doldrums.
While many economists believe the country has fallen into a recession, President Bush last week disputed that contention, saying he believed it was a period of slower growth not an full-blown recession.
"It's obvious our economy is in a slowdown. But fortunately we recognized the signs and took action," Bush said Friday in announcing that the rebates were going out a few days earlier than expected.
The rebate checks are coming as the IRS wraps up sending out the normal refund checks to taxpayers based on their 2007 tax returns which taxpayers had to file by April 15.
Thirty-five percent of those responding to an Associated Press-AOL Money & Finance Poll earlier this month said that they planned to ruse their refund checks this year to pay utility, credit card and other bills. That was up from 27 percent who said they planned to use their tax refunds to pay bills a year ago.
The IRS said all checks for those who filed tax returns on time are scheduled to be deposited or mailed by July 11. The direct deposits and the paper checks are being processed by the last two digits of a taxpayers' Social Security number.
For people receiving direct deposits, those with a Social Security number ending in 00 to 20 will have their economic stimulus payment deposited to their bank account by May 2.
Those with Social Security numbers ending in 21 to 75 will get their direct deposits by May 9 and those with Social Security numbers ending in 76 to 99 getting their deposits by May 16.
Posted Tuesday, April 29, 2008
OPEC president sees $200 oil possible: report
April 28, 2008
ALGIERS (Reuters) - OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide, Algerian government newspaper El Moudjahid reported on Monday.
"Questioned about a possible rise which would go to $200, the minister did not rule out this eventuality, explaining that this rise is indexed from now on to the fall in the dollar or to the rise in the dollar," El Moudjahid reported.
"In terms of fundamentals, stocks are high, demand is easing, supply is satisfactory. Therefore normally, without geo-political problems and the fall of the dollar, the prices of oil would not be at this level," he was quoted as saying.
Khelil, a former World Bank official, is also Algeria's Minister of Energy and Mines.
He added: "The prices are high due to the fact of the recession in the United Sattes and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa," he was quoted as saying in brief remarks to journalists on Sunday.
He added that: "If this (the dollar) strengthens by 10 percent, it is probable that (oil) prices will fall by 40 percent."
If the U.S. economic situation improved from now to the end of the year "that would help the market to stabilize."
"But I don't think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years."
The independent El Watan newspaper reported Khelil as saying that if the dollar's value on currency markets stayed as it was at present, then oil prices would be expected to remain at between $80 and $110 a barrel.
Posted Tuesday, April 29, 2008
Wrigley to be sold to Mars for $23 billion
By James P. Miller
April 28, 2008
Wm. Wrigley Jr., in a move it said will provide "enhanced prospects for growth," confirmed this morning that it has agreed to be acquired by privately held candy-industry giant Mars Inc. for a hefty $80 a share, or nearly $23 billion.
The Chicago chewing-gum company said its board has already approved the all-cash offer, although the transaction still will require clearance from regulators and Wrigley stockholders.
"First and foremost, this is a great transaction at a great price that provides tremendous value to Wrigley stockholders," said Wrigley Chairman Bill Wrigley Jr.
The $80 price represents a substantial 28 percent premium to the $64.25 at which Wrigley shares closed on the New York Stock Exchange on Friday. In early trading Monday on the Big Board, Wrigley shares jumped $14.50, or 23.3 percent, to $76.95.
While Wrigley's stock has climbed to an all-time high, the $3-plus gap between the offering price and the current trading price reflects the fact that a deal may not close for up to a year.
The bigger-than-normal gap may also suggest that investors have reservations about whether a combination of the two companies will pass muster with federal antitrust authorities.
The proposed combination, said Wrigley CEO William Perez, "brings together two strong, complementary confectionery organizations."
To fund the buyout, Mars is relying in part on a $4.4 billion in subordinated debt from Berkshire Hathaway Inc., the investing vehicle of multibillionaire Warren Buffett. As part of the transaction, Berkshire will not only provide funding, but also will buy a $2.1 billion equity interest in Wrigley when it becomes a Mars subsidiary.
"Those of you who know me know that I have been a big fan of Wrigley's business model for many years, and I love their products," said Berkshire CEO Buffett. "When you think of a business that's easy to understand, with favorable long-term economics and able and trustworthy management -- you think of Wrigley," said the celebrated "fundamentals-based" Omaha investor.
Buffett prefers companies that make staple products, and he also has a sweet tooth: at Berkshire's annual meetings, he routinely drinks several Cherry Cokes (Berkshire owns 200 million shares of Coca-Cola) and eats from a one-pound box of peanut brittle made by See's Candies, a candy company which Berkshire owns outright. Buffett also admitted, when he had Berkshire acquire Dairy Queen in the 1990s, that he bought the ice-cream purveyor in part because he likes their product.
For Wrigley, which has been an acquirer in its mature industry over the past several years -- most prominently when it made an unsuccessful $12 billion bid for chocolate-maker Hershey in 2002 -- the role of takeover target is a new one. But with consolidation a byword in the sector, privately owned Mars has also been the subject of recurring speculation in recent years, with Europe's Nestle the rumored buyer.
In its early-Monday release, Wrigley made public a letter from Chairman Bill Wrigley Jr. to the company's stockholders, in which the descendant of founder William Wrigley Jr. outlined the reasons leading up to the "momentous and exciting announcement" that the company has agreed to be acquired.
If approved, he said, Wrigley will become a separate subsidiary of Mars, with him, CEO Perez and the company's other top managers still in place, "and an understanding that we will manage our company as a stand-alone entity."
The Mars family "approached us" with an all-cash buyout offer, Bill Wrigley tells stockholders, and "while the board of directors didn't seek out the Mars offer, we had a fiduciary responsibility to consider it." After lengthy deliberations, he said, Wrigley's directors decided that a sale "is in the best interest of the company's stockholders."
For stockholders, Bill Wrigley contends in his letter, the "benefits of this opportunity are clearly apparent." It offers to combine two strong and complementary confectionery organizations, he said, and "at the same time it frees us from some of the costs -- as well as the constraints and short-term results pressure -- that come with being a public company."
Wrigley executives said that with the company remaining headquartered in Chicago the deal was unlikely to result in any job cuts in the Chicago area. In fact, Mars' non-chocolate sugar brands –Starburst and Skittles– will be added to Wrigley's candy portfolio. That could mean additional jobs for Chicago, but those decisions have yet to be determined, Wrigley said.
Asked about assurances to the public that Wrigley won't get lost in Mars, Wrigley Chief Executive Bill Perez noted that Bill Wrigley will remain involved at the company.
Wrigley himself feels assured by Mars' stewardship of a pet food unit called Royal Canin. It was bought by Mars and has remained a stand-alone entity.
"That company has flourished under their umbrella," Wrigley said at a morning press conference.
Initial conversations about a deal were held April 11 between Wrigley and two Mars executives, including Chief Executive Paul Michaels. The offer accepted Sunday wasn't the first made.
"The price we ended up with was not the original price," Wrigley said. "There was significant back and forth on a continual basis until last night."
Wrigley was asked about whether he thought Warren Buffett was in it for the long haul.
"He's a long-term investor," Wrigley said." Wrigley, Mars and Berkshire Hathaway all look to the long term, and that's what this is about."
It appears that Mars needed Buffett's help to complete the $23 billion deal, given the credit crunch challenging financial markets.
"Coming up with capital was a challenge," Wrigley said.
The companies don't anticipate any antitrust problems given that Mars' strength is in chocolate, and Wrigley's strength is chewing gum.
Wrigley said he has talked to some family members and said he expects them to support the deal. After the deal is closed, the family will have no ownership of the company.
Posted Tuesday, April 29, 2008
Dollar Slide Drives Budget as Japan Shuns Treasuries
By Wes Goodman
April 28 (Bloomberg) -- Add another ailment to the U.S. misery index of soaring gasoline and wheat costs and falling home values: a federal deficit that is burgeoning as foreign investors led by the Japanese recoil from the slumping dollar.
The Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt.
"It's too early to say the dollar will stop falling," said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia's biggest bond fund. "The U.S. economy will be slow for a while."
Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15.
America relies on foreign investors, who own more than half the U.S. government debt outstanding, to finance a deficit that New York-based Goldman Sachs Group Inc. predicts will expand to a record $500 billion for the year ending Sept. 30, after a $163 billion gap last year. Without their support, long-term interest rates would be 0.9 percentage point higher, a 2006 Federal Reserve study found.
Diminishing Returns
The yield on the benchmark 3 1/2 percent Treasury due February 2018 rose 16 basis points last week to 3.87 percent, according to bond broker BGCantor Market Data. The yield is up from 3.28 percent on March 17, the lowest since June 2003. The note's price declined 1 9/32, or $12.81 per $1,000 face amount, to $97. It was 3.83 percent today in New York.
Ten-year Treasury yields fell to within 2.03 percentage points of similar-maturity Japanese government bonds on March 17, the narrowest margin in more than a decade. Japan's 1.65 percent 10-year yield is the lowest of 31 bond markets tracked by Bloomberg and compares with 4.18 percent for German bunds.
A survey of Japanese funds investing overseas found 58 percent favor euro-denominated bonds, up from 20 percent a year ago, Barclays Capital Japan Ltd., a unit of the world's fifth- biggest currency trader, said in an April 24 report. Kokusai cut its U.S. fixed income holdings to a record-low 20 percent in March, from 32 percent two years ago.
European Debt
"European debt is more attractive than Treasuries," said Nobuto Yamazaki, executive fund manager at Diam Asset Management in Tokyo, which runs an $8.55 billion bond fund that is Japan's third-biggest. The euro, which gained 14.5 percent in the past year against the dollar, "will continue to be strong," he said.
Japanese investors have lost 4 percent over the past year after converting interest income and any capital gains into yen, Merrill Lynch indexes show. That compares with a profit of 1.5 percent in Japanese debt and 4.5 percent in German bonds.
The dollar may be rebounding. It appreciated 9 percent to 104.37 yen on April 25 from the 12-year low of 95.76 on March 17. The U.S. currency fell 0.2 percent today to 104.24.
Nippon Life Insurance Co., Japan's largest, is willing to bet on the currency and plans to increase holdings of foreign bonds not hedged against swings in exchange rates by 200 billion yen ($1.91 billion) in the fiscal year that started April 1.
"The dollar at 100 yen is attractive," said Tomiji Akabayashi, investment manager at Nippon Life, which has the equivalent of $488 billion in assets.
Fed Concerns
Nippon Life is the only one of the four biggest life insurers willing to take the risk. Meiji Yasuda Life, the third- largest, started hedging dollar-denominated bonds in January and won't be putting new funds into overseas debt, said Yasuharu Takamatsu, head of the investment department. No. 2 Dai-ichi Mutual said it plans to focus on Japanese debt this year.
Investors are concerned Treasuries will fall as the Fed stops cutting its target rate for overnight loans because of faster inflation, said Naka Matsuzawa, chief strategist in Tokyo at Nomura Securities Co., a unit of Japan's biggest securities firm. The cost of wheat and crude oil has almost doubled in less than 12 months, helping push the annual inflation rate to 4 percent in March from 2.8 percent a year earlier.
"There's a high chance the yen will appreciate against the dollar," said Hirofumi Miyahara, deputy general manager of investment planning at Osaka-based Sumitomo Life Insurance, the fourth-largest. "We're cautious on Treasuries," said Miyahara, whose firm is increasing purchases of Japanese debt.
No 'Charm'
Asian investors outside Japan are also pulling back. Money managers in China, the second-biggest overseas holder of Treasuries, with $486.9 billion, and South Korea say they favor debt in Europe, equities or commodities.
Beijing-based ICBC Credit Suisse Asset Management Co., controlled by China's biggest bank, said last week Treasuries are "not attractive" because of currency risks. South Korea's $220 billion National Pension Service in Seoul said yields on the debt have lost their "charm."
U.S. borrowing costs will rise in the "longer term" because central banks may slowly cut their holdings of dollars to about 30 percent of their reserves in 15 years, from less than 60 percent now, said Kenneth Rogoff, a former chief economist at the International Monetary Fund in Washington.
"The dollar's primacy in the international financial system is being eroded," said Rogoff, a professor at Harvard University in Cambridge, Massachusetts. "Foreign investors have done very poorly in U.S. Treasuries."
Indirect bidders, a group of investors that includes foreign central banks, bought 29 percent of the $19 billion in five-year notes the Treasury sold April 24, down from 34 percent in March.
"I wouldn't jump into U.S. Treasuries," said Hao Kang, who manages a $443 million fund at ICBC Credit Suisse in Beijing. "I am not so confident about the currency."
Posted Tuesday, April 29, 2008
“Our government wants smart ladies to meet smart guys to get smart children.”
A Different Kind of Homework for Singapore Students: Get a Date
By SETH MYDANS
April 29, 2008
SINGAPORE — It was like a college mixer, a classroom full of young men and women seeking a recipe for romance.
They had assembled for the first class of “Love Relations for Life: A Journey of Romance, Love and Sexuality.”
There was giggling and banter among the students, but that was all part of the course as their teacher, Suki Tong, led them into the basics of dating, falling in love and staying together.
The course, in its second year at two polytechnic institutes, is the latest of many, mostly futile, campaigns by Singapore’s government to get its citizens to mate and multiply. Its popularity last year has led to talk of its expansion through the higher education system.
“We want to tell students, ‘Don’t wait until you have built up your career,’ ” said Yu-Foo Yee Shoon, the minister of state for community development, youth and sports, at a news conference in March. “Sometimes, it is too late, especially for girls.”
The courses are an extension of government matchmaking programs that try to address the twin challenges embodied in a falling birthrate: too few people are having babies, and too few of those who are belong to what Singapore considers the genetically desirable educated elite.
Over the past 25 years, the mating rituals organized by the government — tea dances, wine tastings, cooking classes, cruises, screenings of romantic movies — have been among the country’s least successful social engineering programs.
Last year Singapore’s fertility rate fell to a record low of 1.24 children per woman of childbearing age, one of the lowest in the world. It was the 28th year in a row Singapore had stayed below the rate of 2.5 children needed to maintain the population.
But even a replacement-level rate would not be enough for today’s planners. The government recently announced that it was aiming to increase the population by more than 40 percent over the next half-century, to 6.5 million from the current 4.5 million.
“Teaching our youth in school how to fall in love” is a good solution, wrote Andy Ho, a senior writer at The Straits Times, a government-friendly newspaper that does its best to help out in Singapore’s many campaigns.
In 1991, for example, when the government began offering cash bonuses to couples with more than two children, the newspaper printed tips for having sex in the back seat of a car, including directions to some of the “darkest, most secluded and most romantic spots” for parking.
It suggested covering the windows with newspapers for privacy.
Singapore is known for its campaigns of self-improvement, including efforts to get residents to be polite, to smile, to be tidy, to speak proper English and to not chew gum.
In 1984, the country’s master planner, Prime Minister Lee Kuan Yew, declared that too few of the country’s most eligible women, those with college degrees, were marrying and having children. He set up the Social Development Unit to address the problem, and since then the government has been the country’s principal matchmaker.
In addition to its tea dances and moonlight cruises, the agency acts as a lonely hearts adviser, with an online counselor named Dr. Love and a menu of boy-meets-girl suggestions on its Web site, www.lovebyte.org.sg.
“Guys, girls notice everything!” the Web site offers in one of its dating tips. “Comb your hair differently and they notice. Change your watch and they notice! Skipped your morning shower and sprayed on deodorant to cover the smell — they notice! What does this mean? Well, bathe regularly, change something about yourself, be observant, and compliment the lady.”
Mr. Lee himself acknowledged how silly some of this may seem.
“Never mind the hullabaloo in the press, all the foreign correspondents writing that a crackpot government is trying to interfere in people’s lives,” he said when he inaugurated the Social Development Unit. “If we continue to reproduce ourselves in this lopsided way, we will be unable to maintain our present standards.”
In other words, said Annie Chan, director of a matchmaking agency, “Our government wants smart ladies to meet smart guys to get smart children.”
But in Singapore it is impossible to get very far from thoughts of money and the workplace. These guys may have other things on their minds besides romance and babies.
“Some people say if you’re a smart guy you should marry a smart woman who can help you with your finances and career,” said Ms. Chan, whose agency is called Club2040 and who has worked under contract for the Social Development Unit.
Singaporeans quite seriously describe their society as being driven by a local concept called kiasu, a desire not so much to get ahead as to not lose out. That concept might be applied, for example, to a person who pushes ahead of everybody else to get into an elevator.
This single-mindedness, in life as in elevators, seems to leave little room for social graces or for romance or procreation.
“The E.Q. here,” said Ms. Chan, referring to an emotional quotient of social skills, “can be appalling.”
But even while working on the solution, Ms. Chan seems to be part of the problem. She is 39 and has been married for four years, but said she did not have the time or energy to have children.
It is a lot to ask of a college course to break attitudes like this. Three 20-year-old graduates of last year’s inaugural course at Singapore Polytechnic still seemed imbued more with kiasu than romance.
Despite everything their teachers had told them about multitasking work and love, none was in a relationship. And nothing they had heard in class seemed to have dented their stereotypes about the opposite sex.
“I’m not open to relationships in school,” said Wei Shan Koh, a former student who works as a teacher’s aide. “Boys in school are not my cup of tea. They are male chauvinist pigs. They’re annoying and childish. And they won’t give in to you. They’re just not mature.”
Another former student, Tian Xi Tang, was quick to respond.
“I think girls’ ideas are a bit childish, or you might say girlie,” said Mr. Tian, who hopes to become an engineer. “It’s a matter of pride. Guys are more outspoken. We don’t like a girl to be more outspoken.”
Kamal Prakash, who hopes to be a lecturer in mathematics, gave voice to what appears to be the common theme here, among both young people and their elders.
“I am not interested now in love relations because I want to continue my studies,” he said. “If I concentrate on love relations, I won’t be able to concentrate on my studies.”
Posted Tuesday April 29, 2008
China Shenhua Falls as Anglo American Sells Shares
By Ying Lou and Bei Hu
April 29 (Bloomberg) -- China Shenhua Energy Co.(1088.HK), the Asian nation's largest coal producer, fell the most in more than a month in Hong Kong trading after shareholder Anglo American Plc sold all shares it purchased during the initial public offering.
Shenhua dropped as much as 6.2 percent to HK$35.35, the most since March 17, and traded at HK$36.05 at 11:35 a.m. local time. Anglo sold 155.6 million shares in Shenhua at HK$35.46 each, the lower end of a range of HK$35.46 to HK$36.19 each, according to a sales document sent to investors by UBS AG, which managed the sale.
London-based Anglo, the world's second-largest mining company, raised HK$5.52 billion ($708 million) from the largest secondary share sale in Hong Kong since Sun Hung Kai Properties Ltd.'s $1.4 billion sale on Oct. 30, according to Bloomberg data. Anglo's stake, worth $150 million at the time of Shenhua's initial offering in 2005, has surged more than fivefold.
The number of shares Anglo sold was a 0.78 percent stake in Shenhua, or 4.6 percent of the Chinese company's Hong Kong- listed shares, according to Bloomberg calculations based on Shenhua's 2007 annual report.
Shenhua has benefited from a surge in demand in China, the largest producer and consumer of coal. The economy expanded 10.6 percent in the first three months, spurring consumption of the fuel, used to generate almost 80 percent of the nation's power. Shenhua has reserves second only to Peabody Energy Corp., the world's biggest publicly traded coal producer.
Posted Tuesday April 29, 2008
Palm Oil Falls as Indonesia Export Tax Cut Eases Supply Concern
By Claire Leow
April 29 (Bloomberg) -- Palm oil futures in Malaysia dropped after Indonesia, the largest producer, said it will lower its export tax, easing concerns about supplies.
Indonesia will cut the export tax for palm oil to 15 percent from 20 percent for May, the country's trade minister Mari Pangestu said on April 26. Palm oil is the main cooking oil in Indonesia, the world's fourth-largest country by population.
Record palm oil prices spurred Indonesia to double the April export tax on the commodity to secure supplies and ease inflation. Indonesia's inflation accelerated to an 18-month high of 8.2 percent last month. The April figure could slow from March, while still growing from a year ago, Miranda Goeltom, senior deputy governor of the central bank, said today.
"The cut in the Indonesian export tax is the main news in the market," Ong Chee Ting, a plantation analyst at Aseambankers Malaysia Bhd. in Kuala Lumpur, said by telephone. "It's negative for futures."
Palm oil for July delivery dropped 99 ringgit, or 2.8 percent, to 3,411 ringgit ($1,083) a metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur at the 12:30 p.m. break in trading. The most-active contract, down 3.8 percent last week, is now 24 percent lower than its March 4 record of 4,486 ringgit.
Palm oil also tracks its main substitute soybean oil and crude oil, as vegetable oils are used as alternative fuels.
Chicago soybean oil for July delivery dropped 2 percent to 58.48 cents a pound yesterday, and extended declines by 0.8 percent to 58.01 cents in after-hours trading at 12:46 p.m. Singapore time. The commodity reached a record 72.69 cents on March 4.
Crude oil for June delivery dropped 0.2 percent to $118.54 at 12:43 p.m. Singapore time. It reached a record $119.93 a barrel on the New York Mercantile Exchange yesterday, the highest since the futures began trading in 1983.
Posted Tuesday, April 29, 2008
Deutsche DCCs worth looking at in sideways market
By R SIVANITHY
April 29, 2008
ONE of the most fascinating features of any warrants market is the sheer diversity of products that can be offered, with the range limited only by the imagination of issuers.
All needs can be catered for - in the local market, for example, risk seekers have at their disposal hundreds of calls and puts on volatile stocks or indices, while risk-averse players have 'investment-style' warrants that pay whatever dividends might be declared by the underlying assets.
For investors who wish to tread a middle ground that offers some but not a lot of risk and the chance to maximise returns in this low-interest rate environment, there is an interesting instrument which they can consider known as a 'double-chance' certificate, or DCC for short.
Offered by Deutsche Bank, the DCC is a short-term warrant-like instrument that typically carries a four-month expiry. Like other structured products, it is typically written on an underying stock, and like a normal call warrant, it offers a profit if the underlying share rises during the instrument's lifespan.
However, unlike a straightforward call, the DCC does not offer unlimited upside. Instead, the return is capped at twice a predetermined level known as the Cap Strike. A numerical example should clarify.
Suppose Deutsche issues a six-month DCC on SingTel shares at $3.50 at a time when SingTel trades at $3.50. Suppose the bank specifies the Cap Strike to be $3.85, ie 35 cents or 10 per cent above the issue price. As its name suggests, the DCC offers a maximum profit of twice the difference between the Cap Strike and issue price, ie twice 35 cents or 70 cents.
If SingTel's shares trade at or above $3.85 at expiry, then this is the amount that will be paid out. In other words, if at the end of six months (or whatever the DCC's lifespan is) the underlying shares trade at or above $3.85, the DCC holder will receive a total of $3.50 + 70 cents or $4.20, which makes the return on his investment 20 per cent ($4.20/$3.50)
If SingTel trades above $3.50 but below the $3.85 Cap Strike upon expiry, the payout is twice the actual difference plus the original investment. So if the stock is at $3.70 or 20 cents above the original issue $3.50 price, the DCC holder receives a profit of 40 cents or $3.90 in total. In this case, the return on investment is 11.4 per cent ($3.90/3.50). However, if the shares fall below the issue price at expiry, the DCC holder simply receives the share as payment. The loss in this case is therefore equivalent to the loss of having bought the share and held it for the DCC's term.
Note that unless the DCC holder actually sells the stock, the loss need not be realised - the investor can hold the stock and wait for a recovery later.
Note also that DCC buyers need not hold the instrument for the entire period but can trade it in the market - like warrants, DCCs are listed and Deutsche acts as the market maker to ensure sufficient daily liquidity for entry and exit.
Finally, note that in order for the investor to have underperformed in a rising market, the underlying shares have to surge way above the Cap Strike, or $3.85 in the SingTel example.
From this, it should be obvious that DCCs are therefore well suited to investors who believe the market might be firm, but not that firm, and that it might instead trend sideways with a slight upward bias over the ensuing few months.
If this scenario does pan out as anticipated, then the DCC holder can potentially earn double the actual gain (up to the limit pre-specified by the Cap Strike level).
Two DCCs were launched over the past week - on China shipbuilding stocks Cosco Corp and Yangzijiang. A third, on SingTel, is to be launched this week so investors who think the counter will perform in the manner described earlier should give it a close look because in a market that could trade within a narrow band for the next few months, DCCs are definitely worth considering.
Posted Tuesday, April 29, 2008
Citigroup to sell $3 bln in stock; shares fall
By Jonathan Stempel and Dan Wilchins
Tue Apr 29, 2008
NEW YORK (Reuters) - Citigroup Inc said on Tuesday it plans to sell $3 billion of common stock to bolster its capital levels, and its shares declined in after-hours trading.
Chief Financial Officer Gary Crittenden said in a statement that Citigroup had received "strong" interest in the public offering. The company said the issue may grow in size.
Since late 2007, Citigroup has raised more than $36 billion in capital after write-downs and losses mounted from subprime mortgages, loans to fund corporate buyouts, and other debt. The New York-based bank lost about $15 billion in the six months ending March 31.
The offering comes barely a week after Citigroup sold $6 billion of preferred stock.
"It's smart," said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup shares. "Obviously it's dilutive, but it's smarter than going out and having to pay a high premium for a preferred issuance."
"What's amazing is, as horrible as this sector is, however much everybody beats it down all the time, there seems to be an endless stream of people who are more than willing to throw money at these guys," Smith added.
Shares of Citigroup, a Dow Jones industrial average .DJI component, fell 80 cents, or 3 percent, to $25.52 in after-hours electronic trading. They had fallen 49 cents during regular trading.
The offering follows a 46 percent run-up in Citigroup's stock price since it bottomed on March 17 at $18.00 per share, its lowest level since October 1998.
The bank's market value is about $138 billion, based on the closing price and reported shares outstanding as of March 31.
Citigroup said its Tier-1 capital ratio as of March 31 would have been 8.5 percent on a pro forma basis, after adjusting for the common and preferred stock offerings.
The bank on April 18 reported a 7.7 percent Tier-1 ratio. The ratio measures a bank's ability to cover losses. Regulators say 6 percent implies a "well-capitalized" bank.
Citigroup's own investment bankers are arranging the latest stock offering.
Posted Wednesday, April 30, 2008
Subprime losses at Japan banks, brokers to top $9.6 billion
By Chris Oliver
April 28, 2008
HONG KONG (MarketWatch) -- Japanese banks and brokerages are expected to post a combined loss of more than 1 trillion yen ($9.6 billion) in investments tied to the U.S. mortgage market in the recently-ended fiscal year, according to a Japanese media report Tuesday. Japanese banks, which are due to release their fiscal 2007 earnings in the first half of next month, will push the tally for subprime-related losses above the 673 billion yen reported by Japan's top brokerages so far, according to a Nikkei newspaper report. Brokerages Mizuho Securities Co. and Nomura Holdings Inc., two of Japan's top five securities firms and the only ones to report subprime losses, wrote down 413 billion yen and 260 billion yen respectively in the soured investments in the fiscal year which ended March 31.
Posted Wednesday, April 30, 2008
Losses at Deutsche Bank reflect depth of credit crisis
By Mark Landler
April 29, 2008
FRANKFURT: For Deutsche Bank, which had won praise and envy in financial circles for appearing to weather the credit storm better than most of its peers, the lucky streak finally ended Tuesday.
The bank reported a pretax loss of €254 million, or $396 million, in the first quarter of 2008, its first loss in five years, after writing down $4.2 billion in bad loans and mortgage-backed securities.
The losses at Deutsche Bank, which had warned about the write-downs earlier this month, symbolize less a bank that blundered into risky and poorly understood markets than one that is feeling the effects of a credit crisis that has been longer and deeper than anyone expected.
Although revenues were down sharply in traditional Deutsche Bank franchises like credit- and equity-derivatives trading, the overall losses stirred less concern among analysts than the impact of the financial crisis on the bank's day-to-day sales and trading business.
The Deutsche Bank chief financial officer, Anthony Di Iorio, declined to reassert the bank's earnings target for 2008, saying there was too much turbulence in the markets.
The loss would have been even worse if Deutsche Bank had not booked gains from selling shares in Daimler, Allianz and Linde - part of a long-term strategy to divest itself of stakes in German companies.
"Today's numbers were disappointing," said David Williams, head of banking research at the London office of the investment bank Fox-Pitt Kelton Cochran Caronia Waller.
"Deutsche's core business, their day-to-day, bread-and-butter operations have been affected," Williams added.
With the likelihood of further write-downs and the possibility that its trading business may not recover soon, some analysts have concluded that Deutsche Bank did not really avoid the subprime crisis after all. It is merely suffering its effects six months later than Merrill Lynch, UBS and Citigroup.
"Deutsche Bank did much better than its peers because it was less exposed to the subprime areas," said Simon Adamson, an analyst at CreditSights, a research company based in London.
"But now the focus of the write-downs has shifted, and Deutsche has a large leveraged loan book," Adamson added.
The bank said it had €33 billion of exposure to leveraged finance, half of which was funded positions. Di Iorio said that the bank had sold off €1.4 billion of such loans in April.
Deutsche Bank, analysts said, might be forced to write down some of the remaining loans, though not as steeply as mortgage-backed securities, which basically stopped trading after the subprime crisis.
Shares of Deutsche Bank, which have declined 29 percent in the past year, fell 70 cents, or less than 1 percent, to close at €76.65 on Tuesday.
Analysts noted that Deutsche Bank's loss was smaller than those of Credit Suisse or UBS. The bank has written down €5 billion since the start of the crisis, far less than UBS or Citigroup.
Still, the crisis has rippled throughout Deutsche Bank's corporate and investment bank, which had been its profit engine. The unit had revenues of €1.5 billion in the first quarter, compared to €6.7 billion in the same quarter of 2007.
Revenues for sales and trading of debt and equities plunged; but foreign exchange trading, which actually grew, was one of the few bright spots.
"They are the world leader in structured credit products, and that's a market that in the first quarter did absolutely no business," Williams said. "What's it going to do in the next quarters?"
Some bankers have spoken of an improving atmosphere in financial markets in recent weeks. But the Deutsche Bank chief executive, Josef Ackermann, who has been outspoken about the magnitude of the crisis, offered little solace in a statement issued with the earnings.
"In the month of March, pressure on the banking sector was more intense than at any time since the current credit downturn began," he said. "Inevitably, this left its mark on Deutsche Bank's results."
Ackermann reaffirmed Deutsche Bank's strategy, which has sought a balance between volatile trading businesses and more stable operations, like asset and wealth management and retail banking.
The bank may soon have an opportunity to bolster its presence in these more stable areas. Citigroup, as part of a review of its operations, is considering a plan to sell its German consumer bank, according to executives there.
If it were to be put up for sale, Deutsche Bank has already publicly expressed interest in it.
"Citibank has a fairly good quality operation in Germany," said Adamson of CreditSights. "Deutsche might be able to get a favorable valuation, because Citigroup has problems of its own."
Posted Wednesday, April 30, 2008
As inflation squeezes middle-class Europe, anxiety about the future
By Carter Dougherty and Katrin Bennhold
April 29, 2008
LES ULIS, France: When the local bakery increased the price of a baguette for the third time in six months last year, Anne-Laure Renard and Guy Talpot invested in a bread-baking machine. When gasoline became their single biggest monthly expense in January, they decided to sell one of their two cars.
Now, as everything from baby milk to chocolate desserts drives up their living costs, Renard, a teacher, and Talpot, a mailman, are planning their most radical lifestyle change yet: They are getting married to reduce their tax bill.
"I never thought I would be in this position, counting every cent," Renard said one recent evening as her companion measured milk powder for their 13-month-old son, Vincent, in the kitchen. "I mean, I am a teacher. If I can't get by, how do others manage?"
They are not poor, but they are peeved.
Across Europe, people in the middle layer of the labor force - from office workers, civil servants and skilled laborers to low-level managers - are coping with a growing sense that they are being pushed to the margins like never before, as a combination of rising costs and stagnant wages erodes their purchasing power.
Prices for basic goods from gas to milk are rising sharply, outpacing pay rises linked to official rates of inflation. Families that once maintained pleasant lifestyles afforded by two incomes find the rise in costs - which have accelerated worldwide in the past year - has pushed them to the tipping point. Many Europeans are pinching pennies on food and everyday items, while cutting back on a range of extras, from movie tickets to vacations abroad.
More worrisome, a generation of European workers is grappling with a rising sense of injustice as they face the reality that they may be becoming worse, not better, off than their parents. Even holding classic middle-class professions with a university degree has become less of a guarantee against economic hardship. That, in turn, is igniting concerns of an even more uncertain future for their own children.
"We are cycling against the wind," said Robert Rochefort, director general of Credoc, a institute based in Paris that researches living standards and consumption patterns. "We have to pedal faster so we don't slow further. But pedaling faster doesn't mean we will necessarily go faster."
To be sure, the middle class in Europe is still more prosperous than the disturbingly large group of citizens who are at risk of poverty. According to the European Commission, 16 percent of the population of Europe falls into this category. Policy makers are concerned that could worsen as the economy feels the sting of a U.S. slowdown, while inflation spirals around the globe.
Yet these same forces are also widening the pool of middle-class Europeans who see themselves on the edge of impoverishment.
"The problem," said Julián Cubero, chief economist for Spain for BBVA, a leading Spanish bank, "is that if your salary rises more slowly than the cost of products you buy on a daily basis, you feel poorer every day."
That concern boiled over to anger last week in Britain, when teachers closed the country's schools for the first time in two decades to protest pay deals that are not keeping up with the soaring cost of living. Especially for those who were not lifted by the latest financial market bubble before it started to collapse last summer, there is fear that proposed pay rises of about 2.5 percent are too meager to absorb food and oil costs that have surged in Britain by about 7 percent and 20 percent, respectively, from a year ago.
Their rallying cry is the latest to echo across Europe. German workers in several industries last month waged a series of strikes to demand a greater piece of the economic pie after years of being asked to make do with stagnant wages.
In France, a range of professions from teachers to factory workers have taken to the streets to urge politicians to counter a decline in purchasing power. This month, thousands of European workers protested on the same theme in Ljubljana, the capital of Slovenia, which currently holds the EU's rotating presidency.
Bowing to public concern, some European governments are promising relief, though their powers to curb inflation or raise pay are limited. In France, where the erosion of purchasing power has overtaken unemployment as the No. 1 public concern, the administration of President Nicolas Sarkozy is, among other things, looking into alleged "abuses" of pricing by food merchants. Neighboring Germany is mulling lower social insurance taxes to offset higher prices.
Capturing the squeeze felt by the European middle class in statistics and across national boundaries is tricky because this grouping has no universal definition. National authorities calculate purchasing power differently, making cross-border comparisons difficult.
Much of the story of declining purchasing power can be traced to policy decisions and economic developments that have taken place within the last decade, when the forces of globalization began to reshape the European and global landscapes.
Governments and employers, especially in industrial sectors, have kept pay rises modest, a trend that was manageable as long as inflation did not accelerate in a surprisingly sharp manner. In addition, more of each country's income has gone to the wealthiest individuals, underpinning the acute feelings of inequality across the broad middle class.
"If you have a slowly growing cake being distributed more unevenly among the population, that is felt as a reduction in purchasing power," said Daniel Gros, director of the Center for European Policy Studies in Brussels.
In Germany, the largest European economy, purchasing power had already been declining since 2000, when employers were able to wrest wage concessions or simply shift jobs away as Eastern Europe and China emerged as centers of low-cost labor. Inflation-adjusted incomes rose between 1 percent and 2 percent in the late 1990s, but in 2006 they rose only 0.5 percent and then declined by the same amount last year.
In France, the introduction of a shortened, 35-hour workweek in 2000 has kept average annual pay increases small. Spain, which generated thousands of new jobs for Spaniards and migrant workers by pumping up the housing market, has seen joblessness jump since the bubble burst, while wages are eaten by an inflation rate that is more than double the 2 percent level that most economists consider stable.
Stagnant pay and soaring food and energy prices have curbed consumption in Italy more than any of the other 14 countries that share the euro, sharpening fears that the country cannot escape decline.
Since 1999, consumer prices in the EU's 27 member states have risen 22.5 percent, and are up 18.8 percent among the 15 countries that use the euro.
But some pushback is emerging, as the demonstrations in Britain suggest.
Employers and economists in Germany drummed into public discourse the point that labor costs had spun out of control, costing manufacturers much of their market share.
But with purchasing power eroding, unions are trying to reverse the trend, drawing a tougher line in wage talks - with some success.
"The idea that 'I will sacrifice to save my job' is dying," said Ralf Berchthold, a spokesman with Ver.di, the largest services union in Germany. "People are ready to fight now."
Posted Wednesday, April 30, 2008
王冠一： 乘 數 效 應 難 符 預 期
2008年04月30日（星期三）
美 國 政 府 為 救 經 濟 而 推 出 規 模 達 1680 億 的 振 興 經 濟 方 案 ， 首 批 退 稅 支 票 本 周 開 始 陸 續 寄 出 ， 涉 及 金 額 多 達 1100 億 美 元 。 今 次 按 人 頭 派 錢 ， 納 稅 人 和 家 庭 成 員 每 人 可 分 得 600 美 元 ， 數 目 相 當 可 觀 ， 但 能 否 產 生 刺 激 經 濟 增 長 的 預 期 效 果 ， 很 視 乎 所 能 發 揮 的 乘 數 效 應 （ multiplier effect ） 有 多 大 。
退 稅 不 用 於 消 費
各 家 金 融 機 構 對 今 次 派 錢 的 效 果 有 不 同 的 看 法 ， 當 中 以 高 盛 最 樂 觀 ， 認 為 可 額 外 帶 來 2% 的 經 濟 增 長 ， 而 美 銀 和 美 林 則 分 別 預 測 額 外 GDP 只 有 1% 和 0.5% 。 冠 一 傾 向 支 持 後 兩 者 的 看 法 ， 因 為 美 國 人 現 時 欠 債 纍 纍 ， 這 筆 意 外 之 財 必 然 不 會 全 數 投 入 消 費 市 場 ， 令 乘 數 效 應 大 打 折 扣 。
根 據 CNN 所 作 的 一 項 調 查 ， 受 訪 者 中 表 示 會 把 退 稅 全 部 用 於 消 費 的 只 有 21% ， 表 示 會 用 來 還 債 的 比 重 高 達 41% ， 亦 有 32% 表 示 會 把 錢 儲 起 來 積 穀 防 飢 。 調 查 結 果 反 映 美 國 人 負 債 沉 重 之 餘 ， 亦 顯 示 在 現 時 的 經 濟 狀 況 下 ， 不 少 美 國 國 民 對 前 景 已 產 生 危 機 感 ， 在 用 錢 方 面 亦 不 如 經 濟 榮 景 時 般 「 爽 手 」 。
美 國 經 濟 與 昔 日 出 現 衰 退 時 最 大 的 分 別 ， 在 於 現 時 物 價 樣 樣 貴 ， 尤 其 是 食 品 和 汽 油 （ 其 實 在 地 大 物 博 的 美 國 ， 汽 油 亦 可 歸 類 為 必 需 品 ） 價 漲 ， 更 令 生 活 水 平 急 降 ， 民 生 困 苦 。 因 為 美 國 企 業 經 過 上 一 次 科 網 泡 沫 爆 破 引 發 的 經 濟 衰 退 後 ， 採 取 了 嚴 格 的 節 流 措 施 （ 這 亦 是 美 國 企 業 盈 利 近 年 增 長 令 人 滿 意 的 最 大 原 因 ） ， 美 國 國 民 過 去 數 年 的 薪 金 實 際 增 幅 不 大 ， 消 費 旺 盛 ， 全 仗 樓 股 上 升 的 財 富 效 應 。
乘 數 效 應 若 有 4 倍 ， 今 次 振 興 方 案 便 可 為 經 濟 額 外 注 入 逾 6700 億 美 元 ， 足 以 令 經 濟 起 死 回 生 ， 可 惜 今 次 乘 數 效 應 應 難 符 預 期 成 績 ， 再 加 上 退 稅 屬 一 次 過 性 質 ， 不 像 2001 年 般 除 退 稅 外 ， 還 有 永 久 減 稅 措 施 作 配 套 ， 故 對 經 濟 的 刺 激 估 計 只 能 維 持 六 個 月 。 屆 時 樓 市 若 乏 起 色 ， 美 國 經 濟 仍 將 岌 岌 可 危 ！
*********************************************************************************
曾淵滄：26000 點 未 必 是 阻 力 位
2008年04月30日（星期三）
昨 日 恒 指 一 度 突 破 26000 點 ， 也 可 以 說 是 完 成 了 熊 市 第 二 期 反 彈 的 第 一 種 可 能 ， 最 差 表 現 的 可 能 ， 最 佳 表 現 會 是 28000 點 。 我 的 許 多 朋 友 都 說 ， 他 們 開 始 賣 股 了 ， 賣 掉 去 年 被 套 牢 至 今 的 股 ， 他 們 的 理 由 是 ， 最 佳 表 現 與 最 差 表 現 只 是 2000 點 （ 假 設 道 氏 理 論 正 確 ） ， 這 2000 點 不 賺 也 罷 ， 現 金 為 主 更 重 要 。
我 比 較 樂 觀 ， 我 認 為 如 果 很 多 人 都 認 為 26000 點 夠 了 ， 那 麼 ， 就 一 定 不 止 26000 點 ， 大 戶 會 出 來 挾 淡 倉 ， 殺 掉 那 一 些 認 為 26000 點 有 阻 力 的 淡 倉 。
我 的 愛 股 國 壽 （ 2628 ） ， 星 期 日 公 佈 業 績 倒 退 69% ， 有 人 認 為 星 期 一 股 價 會 大 跌 ， 但 只 是 跌 1.6% 而 已 ， 表 現 很 不 錯 。 跌 了 一 天 ， 昨 日 已 收 復 失 地 ， 上 升 1.5% 。 許 多 人 把 國 壽 的 業 績 與 內 地 A 股 掛 釣 ， 是 的 ， 國 壽 投 資 不 少 A 股 ， 但 國 壽 的 主 要 利 潤 來 源 不 是 炒 股 票 ， 而 是 保 險 業 務 的 保 費 、 代 客 投 資 業 務 的 服 務 費 。 中 國 的 人 壽 保 險 市 場 仍 有 巨 大 的 發 展 空 間 ， 前 途 無 限 。
眾 多 中 資 股 中 ， 中 移 動 （ 941 ） 的 反 彈 動 力 最 令 股 民 高 興 ， 現 在 中 移 動 股 價 與 去 年 最 高 峰 比 較 ， 跌 幅 不 足 10% ， 只 有 在 去 年 10 月 中 旬 之 後 ， 股 市 最 瘋 狂 的 那 幾 天 入 市 者 ， 現 在 仍 在 套 牢 ， 餘 者 皆 已 鬆 縛 ， 升 至 有 利 潤 。
黃 金 股 炒 味 濃 風 險 高
台 灣 的 國 民 黨 榮 譽 主 席 連 戰 訪 京 ， 獲 得 胡 錦 濤 主 席 親 自 接 見 ， 規 格 很 高 。 連 戰 每 次 訪 京 都 獲 得 極 高 的 規 格 接 待 ， 這 說 明 中 央 政 府 也 很 想 進 一 步 推 動 兩 岸 關 係 ， 特 別 是 商 業 關 係 。 台 灣 經 濟 的 前 途 肯 定 非 常 好 ， 但 是 ， 有 人 問 我 ， 過 去 一 個 月 ， 台 灣 股 市 的 升 幅 並 沒 有 如 火 箭 般 上 升 ， 為 甚 麼 ？
我 認 為 原 因 是 至 今 為 止 ， 台 灣 股 市 仍 然 未 對 外 開 放 ， 投 資 台 灣 股 市 仍 然 是 以 類 似 QFII 的 形 式 為 主 ， 外 資 不 易 進 入 ， 自 然 難 以 大 漲 。 必 須 等 馬 英 九 正 式 上 台 ， 開 放 外 資 前 往 投 資 股 市 、 樓 市 ， 則 股 市 樓 市 才 會 急 速 上 漲 。
紫 金 （ 2899 ） 受 傳 聞 所 累 ， 股 價 一 度 急 跌 ， 內 地 幾 家 黃 金 股 ， 很 幸 運 我 從 來 沒 碰 過 ， 我 一 直 感 到 這 幾 隻 黃 金 股 炒 味 太 濃 ， 風 險 奇 高 。
Posted Wednesday, April 30, 2008
Consumer confidence falls to 5-year low
NEW YORK, April 30 (Reuters) - Confidence among U.S. consumers fell to a five-year low in April as they confronted the grimmest jobs outlook since late 2004 and they expect inflation to rival the levels last seen in the early 1980s, the Conference Board said on Tuesday.
The private Conference Board's index of consumer sentiment fell to 62.3 in April, the lowest since March 2003, when the Iraq war was launched, from an upwardly revised 65.9 in March.
Economists had expected the index to fall more sharply to 62.0, according to a median forecast in a poll by Reuters. On Wall Street, stocks turned lower in the wake of the data while the dollar was little changed.
Government bonds, which usually benefit from signs of economic weakness, held onto the day's earlier gains.
"This does not really change our view that consumers are continuing to experience the strain of higher oil and food prices," said Mark Meadows, currency strategist at Tempus Consulting in Washington.
The monthly survey's gauge of inflation expectations surged to 6.8 percent from 6.1 percent in March, which is likely to support expectations that the Federal Reserve will soon wind down its aggressive campaign of interest rate cuts.
This month marked the highest reading on inflation expectations since a matching 6.8 percent in September 2005, the aftermath of Hurricane Katrina, which briefly sent energy prices soaring.
Food and energy prices in recent months have remained stubbornly higher amid a global boom in commodities and a weak U.S. dollar. The last time the government's consumer inflation gauge reached 6.8 percent was 1982.
Reflecting worries about the labor market, the gauge of respondents' feelings that jobs are plentiful slid to 16.6 in April, the lowest since September 2004, from 19.2 in March.
A measure of the view that jobs are hard to get rose to 27.9 -- the highest since November 2004 -- from 24.5.
The index of consumers' assessment of their present situation fell to 80.7, the lowest since December 2003, from 90.6.
The release by the Conference Board, a private business and research organization, follows Friday's Reuters/University of Michigan gauge of consumer sentiment, which hit its weakest in 26 years on heightened worries over jobs, inflation and the moribund housing market.
Earlier on Tuesday, data showed prices of existing U.S. single-family homes extended their slump in February, with 17 of 20 measured regions posting record annual falls, according to the Standard & Poor's/Case Shiller home price index.
Posted Wednesday, April 30, 2008
Singapore March M3 S$323 bln vs S$287 bln; M2 S$313 bln vs S$280 bln
April 29, 2008
SINGAPORE (Thomson Financial) - Singapore's broad money supply, as measured by M3, rose to S$323 billion ($238 billion) in March from S$287 billion in the same period last year, while M2 increased to S$313 billion from S$280 billion, official data showed on Wednesday.
Narrow money, as measured by M1, rose to S$69 billion in March from S$56 billion, the Monetary Authority of Singapore said.
($1 = S$1.36)
Posted Wednesday, April 30, 2008
HBOS Plans to Raise 4 Billion Pounds in Share Sale
By Jon Menon and Peter Woodifield
April 29 (Bloomberg) -- HBOS Plc, the U.K.'s biggest mortgage lender, will sell 4 billion pounds ($8 billion) of shares to bolster capital depleted by asset writedowns and a deteriorating housing market.
Chief Executive Officer Andy Hornby said today he expects home prices to fall in both 2008 and 2009 by less than 10 percent and is "planning for a more challenging environment ahead." HBOS wrote down an additional 2.8 billion pounds on mortgage-related losses and will reduce its dividend this year, the Edinburgh-based bank said in a statement.
HBOS faces rising defaults as U.K. house prices fall at the fastest rate since the recession of the 1990s. Its share offer comes a week after Royal Bank of Scotland Group Plc, Britain's second-biggest bank, said it will sell 12 billion pounds of stock because of the credit-market crunch. The seizure has halted sales of mortgage-backed securities, which funded more than half of HBOS loans, and Hornby predicted the market won't reopen this year.
"The important thing here is the signaling element," said Mamoun Tazi, a London-based bank analyst at MF Global Securities Ltd. "The situation may get worse in the U.K.," said Tazi, who has a "neutral" rating on HBOS shares.
HBOS, Britain's second-worst performing bank stock this year, fell 1.8 percent to 486.75 pence in London, valuing the company at 18.2 billion pounds. The shares are down 34 percent this year, more than any other U.K. bank except Bradford & Bingley Plc, Britain's biggest lender to landlords.
'A lot of Money'
"It looks as though investors will be putting up a lot of money and the likelihood is that profitability won't improve in the short term," said Julian Chillingworth, chief investment officer at London-based Rathbone Brothers Plc, who helps manage about $21 billion including HBOS stock.
HBOS plans to offer two new shares for every five outstanding at 275 pence apiece. The bank will boost its Tier 1 ratio, a measure of capital strength, to between 6 percent and 7 percent to achieve a "step change" in reserves by year end.
Hornby told analysts that regulators put "no pressure at all" on HBOS to boost capital.
"The rights issue is not at all a good deal for investors," David Broadley, an investor from Glasgow, said at the bank's annual investors' meeting. "It is pouring good money after bad."
The bank, which owns Halifax and Bank of Scotland, has cut back on mortgage lending amid higher inter-bank lending costs and a seizure in the credit markets. Falling house prices would require the bank, which has a 20 percent share in U.K. home lending, to shore up capital under new regulations, Credit Suisse said in a note to investors this month.
'Very Weak'
The bank, forecasting assets will grow less than 10 percent this year, will keep a "tight" control on costs, Hornby said in an interview. The company, unlike RBS, doesn't plan to sell assets, he said.
"We see a subdued first half of the year, giving way to a much stronger second half," Hornby said at the shareholder meeting. The corporate lending unit will try to take advantage of "fair-weather competitors leaving the field."
HBOS revenue may shrink this year, said Alex Potter, an analyst at Collins Stewart in London. "Cost cuts will help, but the outlook is very weak," said Potter, who has a "sell" rating on the shares.
HBOS's second-half profit fell 8.9 percent to 1.93 billion pounds, it said in February. The bank wrote down 227 million-pounds for that period related to asset-backed securities and lowered the valuation of debt securities by 509 million pounds.
The world's largest financial institutions have posted $312 billion of writedowns and losses related to the collapse of the U.S. subprime mortgage market last year. That has forced them to raise a total of $217 billion in new capital.
Edinburgh-based RBS announced its share-sale plans after writing down 5.9 billion pound of assets. Barclays Plc's Chairman Marcus Agius said a share sale is an "option" for the bank.
Monoline Risk
HBOS's writedowns so far this year exceed last year's total. The bank wrote down asset-backed securities of about 970 million pounds in its trading book and 1.87 billion pounds in its banking book, which doesn't affect regulatory capital or profits, it said.
Some of HBOS credit risks are related to bond insurers that might not be able to make good on guarantees. The bank's "nominal exposure" was 2.8 billion pounds on credit default swaps and 2.3 billion pounds on wrapped bonds. The bank has written down assets backed by so-called "monoline" insurers by 180 million pounds on a pretax basis, it said. HBOS said the writedowns will probably reverse over time.
This year's performance will be worse than last year because of higher funding costs and lower revenues from corporate investments, HBOS said today. Corporate-banking profit this year will fall to 2006 levels, it said earlier this month.
Overseas Expansion
Margins will "stabilize or even increase in 2009," Hornby said. The company will continue to "target our overseas expansion plans," he said.
The dividend payout ratio has been lowered to 40 percent of earnings from 46 percent before, the company said. HBOS raised its dividend when it reported 2007 results in February.
"We are planning for a more challenging environment ahead, and the proceeds of the rights issue should ensure that we benefit from strong ratios even if the macroeconomic environment deteriorates further," Hornby said. "In the long term we remain optimistic about the fundamental prospects for our core businesses."
Posted Wednesday, April 30, 2008
Singapore's GIC may invest in more banks - TV
SINGAPORE, April 30 (Reuters) - The Government of Singapore Investment Corp may invest in more banks in Europe and the United States if it gets the chance, adding to its stakes in beleaguered bank UBS and Citigroup, its chairman told Bloomberg TV.
"If there are other banks of the quality of the two that we bought into, with the promise and the capabilities and inherent capabilities to recover, we have got the liquidity to meet it, to make such an investment," GIC Chairman Lee Kuan Yew told Bloomberg TV in an interview broadcast on Wednesday.
"We are buying something that we intend to keep for the next two to three decades and grow with them", he said, adding that GIC was a long-term investor.
GIC, one of the world's largest sovereign funds, invested about $11 billion in UBS and Citigroup after they wrote off billions of dollars in the wake of the credit crisis in the United States.
Its sister fund, Temasek Holdings, which is run by Lee's daughter-in-law, pumped $5 billion into Merrill Lynch.
The two Singapore funds have since seen the value of their investments shrink with UBS shares falling about 35 percent since GIC first announced its plan to inject funds into the Swiss bank by buying mandatory convertible notes.
Lee defended the investments saying Singapore had bought very good franchises and brand names that would recover in time.
GIC measured its performance over five to 10 years, he said.
"Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it."
Citigroup, he added, had "an enormous spread worldwide as a retail bank".
Lee, 84, was independent Singapore's first prime minister and is the father of Prime Minister Lee Hsien Loong. He still holds a cabinet position in his son's cabinet.
GIC says on its website www.gic.com.sg that it manages well above $100 billion but many analysts estimate the figure is closer to $300 billion.
Morgan Stanley said in February that GIC was the world's third-largest state fund with $330 billion in assets under management, behind the Abu Dhabi Investment Authority with $875 billion and Norway's Government Pension Fund with $380 billion.
Temasek manages $159 billion and is the world's seventh-largest sovereign fund, according to Morgan Stanley.
Posted Wednesday, April 30, 2008
Fed expected to cut key interest rates one more time
By MARTIN CRUTSINGER
April 30, 2008
WASHINGTON (AP) — The Federal Reserve, which began the year aggressively fighting a severe credit crunch and economic weakness, may push the pause button after delivering perhaps one more quarter-point cut in interest rates.
Fed Chairman Ben Bernanke and his colleagues were to wrap up a two-day meeting Wednesday and financial markets widely expected that the discussions will end with an announcement that the Fed will cut a key interest rate by a quarter-point.
That would be the seventh reduction in the federal funds rate since the central bank began battling against the credit squeeze and the growing possibility of a recession last September.
The Fed delivered two three-quarter-point moves and one half-point cut over an eight-week period from mid-January to mid-March that represented the central bank's most aggressive rate cuts in a quarter-century.
However, the central bank is expected to respond with a less aggressive quarter-point move at this meeting, in part because the financial turmoil seems to have eased and because there are growing concerns about inflation.
While there is some thought that the Fed might decide to forgo a rate cut, most analysts believe that the greater likelihood is a quarter-point move.
"My best guess is that they want to buy a little more insurance against an economy that looks like it is in recession," said Lyle Gramley, a former Fed board member with the Stanford Financial Group.
A quarter-point cut would move the funds rate to 2 percent, a full 3 percentage points below where it was on Sept. 18 when the Fed started cutting rates.
A quarter-point move would trigger a similar reduction in banks' prime lending rate, the benchmark for millions of consumer and business loans, which now stands at 5.25 percent.
The Fed's rate-setting Federal Open Market Committee, composed of Fed board members in Washington and regional Fed bank presidents, is split into two camps. One group is concerned that the severe credit crisis and prolonged housing slump could be pushing the country into a deep recession while a smaller faction is worried that the Fed could be running the risk of letting inflation get out of control even as the economy slows.
Whatever the Fed does at the conclusion of this week's meeting, private economists believe it will leave the door open for further rate cuts, seeking to avoid the mistake made at the October meeting when it sent a pause signal, only to have to backtrack.
"They made a big mistake after the October meeting, implying that they would pause, and then had egg all over their face when they had to begin cutting rates aggressively because the economy weakened more than they thought and the credit crisis turned out to be more severe," said David Jones, head of DMJ Advisors, a private economic consulting firm.
While leaving the door open this time for further rate cuts if needed, the Fed may well be done, many analysts believe, if financial markets continue to improve and the economy starts to rebound with the help of the previous Fed rate cuts and 130 million economic stimulus payments, which started showing up in Americans' bank accounts this week.
While many economists believe the country is in a recession, the expectation is that it will be a short one ending this summer. If that turns out to be correct, the Fed may hold rates steady for the rest of this year with the next move being a rate increase sometime next year when the economy is on sounder footing.
"The Fed won't start raising interest rates until the unemployment rate has peaked and started coming back down," said Mark Zandi, chief economist at Moody's Economy.com. He said he was looking for the jobless rate, now at 5.1 percent, to climb to 6 percent early next year before starting to fall.
Posted Wednesday, April 30, 2008
Britain's BG bids $12 bln for Australia's Origin
By Fayen Wong and Tom Bergin
April 30, 2008
PERTH/LONDON (Reuters) - British gas producer BG Group Plc has made a $12.1 billion bid approach to Australian utility and emerging gas player, Origin Energy Ltd, seeking to bolster its position in the Pacific gas market.
The companies said BG, valued at around $86.5 billion, had approached Origin with a proposal of A$14.70 per share in cash -- a 40 percent premium to Origin's close of A$10.47 on Tuesday.
BG said it would fund the purchase with cash and debt, as it announced a forecast-beating 78 percent rise in first-quarter profits to 767 million pounds ($1.52 billion), helped by a tripling in profits trading liquefied natural gas (LNG) in Asia.
One dealer said the bid looked expensive and BG shares traded down 0.15 percent at 1,306 pence at early morning despite topping earnings forecasts by 11 percent.
Analysts have seen Australia's north-west shelf as a key gap in BG's portfolio.
A purchase of Origin, which holds 4,578 petajoules of proved, probable and possible (3P) gas reserves, could help fill this and enable BG to better exploit the fast-growing Pacific Basin LNG market.
"Its a pretty high price and premium. And it's all cash so its going to be hard for Origin to turn it down," said Sydney-based Jason Mabee, a utilities analyst at ABN AMRO.
Shares in Origin, Australia's second-largest power retailer, jumped as much as 39.4 percent to a life high of A$14.60, and traded 36 percent higher at A$14.25, below the indicative offer, by 1:23 a.m. EDT (0523 GMT), indicating investors were not expecting a better offer.
"I would have thought it'd be hard to get competing interest. It's not as if it's a low offer putting it in play. This seems like a fairly full offer on face value," said Rohan Walsh, an investment manager at Karara Capital.
POSSIBLE DEFENCE
Origin is the largest holder of coal seam gas resources in Queensland. It is also Australia's only vertically-integrated energy company with oil and gas production assets accounting for about a quarter of its revenues, which have helped offset tighter margins in its traditional retail energy business.
Some analysts said Origin may use its gas resources and proximity to other proposed LNG projects in Gladstone to fight for a higher price.
Local rival Santos Ltd, which also plans an LNG plant at Gladstone, could potentially throw in a rival bid for Origin, but the chances of that happening were fairly slim, analysts said.
"Santos could make a bid but it would be difficult for them to come up with a higher offer since it (BG) has more financial muscle," said a Melbourne-based analyst who asked not be identified because he was not authorized to speak to the media.
BG and partner Queensland Gas Co Ltd plan to build an A$8 billion single-train LNG plant with capacity of 3-4 million tonnes a year near the Queensland port of Gladstone, and analysts said Origin's coal seam methane assets could feed a second plant.
BG paid A$664 million in February for a 10 percent stake and assets in coal seam gas producer Queensland Gas.
Origin said in a separate statement that its third-quarter production rose 17 percent to 23.8 petajoules equivalent, thanks to increased coal seam gas production and the start up of the Otway Gas project offshore Victoria state.
Origin, which also owns power stations and 51 percent of Contact Energy Ltd, New Zealand's largest energy company, has a 23 percent market share in the gas and electricity business in eastern Australia, closely trailing rival AGL Energy Ltd's 26 percent.
Peter Chilton, an analyst with Constellation Capital Management, said BG could sell off Origin's power and retail business to help fund the deal.
But others said BG, which also has a portfolio of mostly gas-fired power stations in Britain, Malaysia and the United States, could keep some of Origin's power generation assets as they would provide a channel for BG to sell its gas produced from the Gladstone LNG project.
Origin advised shareholders to take no action pending further announcements from the company.
BG's offer is pitched at about 24 times forecast 2008 earnings, compared with Queensland Gas' 113.52 times and Arrow Energy's 50 times, according to Reuters data.
Goldman Sachs and Gresham Partners are advising BG. Macquarie is adviser for Origin.
Posted Wednesday, April 30, 2008
BP and Shell post big profits in era of record oil prices
By JANE WARDELL
April 29, 2008
LONDON, United Kingdom (AP) -- BP PLC and Royal Dutch Shell PLC, Europe's two biggest oil producers, posted forecast-busting first-quarter earnings on Tuesday thanks to record crude oil prices that are expected to bolster profits across the industry.
The combined profits of $17 billion reignited calls for a windfall tax on oil profits as consumers struggle to pay for food and fuel.
British Prime Minister Gordon Brown suggested that some of those profits should be reinvested in costly exploration for new oil reserves in the North Sea.
BP posted a 63 percent surge in first-quarter net profit to $7.6 billion (4.9 billion euros), while Shell reported a 25 percent rise, to a record $9.08 billion (5.81 billion euros).
Revenue at BP jumped 44 percent to $89.2 billion (57.1 billion euros), while sales at Shell soared 55 percent to $114 billion (72.95 billion euros).
Last week ConocoPhillips reported a 16 percent rise in net income to $4.14 billion. Like BP and Shell, the third biggest U.S. producer far outpaced industry expectations. More big profits are expected from the biggest two U.S. companies, Exxon Mobil Corp. and Chevron Corp., when they report first-quarter earnings later this week.
Crude oil hit $111.80 per barrel during the quarter, while gas jumped an average of 22 percent. Crude has pushed even higher since, reaching a record $119.93 per-barrel this week.
BP shares jumped 6 percent to 613 pence ($12.18), while Shell rose 4.5 percent to 25.83 euros ($40.39).
The enormous profit reports from European companies coincided with the end of a two-day refinery strike in Britain that shut off 700,000 barrels of oil per day, brought from the North Sea to a BP plant.
Truck drivers staged a protest in London's Park Lane on Tuesday, blaring their horns to protest a 30 percent rise in the price of diesel over the past year. A similar protest took place in Washington, D.C. on Monday, and it wasn't the first.
"The price of fuel is becoming something many families are struggling with," said Sheila Ranger, a spokeswoman for the RAC Foundation, a commuter advocacy group. "This will be the last straw for some motorists."
Shell's Chief Financial Officer Peter Voser said oil companies are not to blame.
"We don't understand the oil price at this stage," he said. "The fundamentals will not justify an oil price as we see it at the moment."
Shell's earnings from oil production rose 52 percent to $5.14 billion (3.3 billion euros), due almost entirely to the price increases. The company said combined production of gas and oil equivalents increased by less than 1 percent to 3.4 million barrels per day, as a 9 percent rise in gas production outweighed a 6 percent fall in oil production.
Stripping out the impact of oil inventories that have risen in value, refining profits would have fallen 20 percent, Shell said.
"It seems that better marketing and trading were able to offset the weak refining environment," analyst Alexandre Weinberg of Petercam.
Shell has invested heavily to improve production after a string of setbacks, including an accounting scandal in 2004. More recently, it has faced attacks on its pipelines in Nigeria and a forced sale of part of its stake in a major project on Russia's Sakhalin Island to a state-run enterprise.
BP's profit follows an even rougher period for the company from production outages, U.S. environmental fines and fraud and the scandal-tinged departure of its chief executive.
Chief Executive Tony Hayward, who took over from John Browne a year ago, has focused on bringing new production and refining capacity on line to improve earnings.
"At last, it appears that BP is beginning to improve its operational performance and this looks set to drive a stronger financial performance in the second half," said Tony Shephard, analyst at Charles Stanley & Co.
BP's closely watched replacement cost profit rose 48 percent to $6.59 billion (4.34 billion euros), compared with $4.44 billion in the first quarter of 2007. The replacement cost figure is viewed by many analysts as the best measure of an oil company's underlying performance because it excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices.
The company said refining availability improved for the sixth successive quarter.
"BP is still not firing on all cylinders but its operational turnaround looks to be on track with a strong second half recovery in prospect," said Charles Stanley & Co. analyst Tony Shephard.
Posted Wednesday, April 30, 2008
Some Chinese Exporters Prefer Euros to Dollars
By KEITH BRADSHER
April 30, 2008
GUANGZHOU, China — Facing the double-barreled threat of a falling dollar and weakening American demand, some Chinese exporters are starting to ask European customers to pay in euros.
Others are trying to increase domestic sales. This, in a nation whose economic juggernaut was built on exports.
Drastic times call for drastic measures. The dollar’s fall against China’s currency has been accelerating — it is down 4 percent so far this year, after dropping 7 percent last year. That has left businesses across China nursing losses and trying to figure out how to raise prices for overseas buyers, Chinese executives and sales representatives said in interviews here at the Canton Trade Fair. The fair runs through Wednesday.
Ma Lin Ping, the general manager of Taizhou City Qizhou Industry, said that his company had lost $43,000 on a single deal last year because of the dollar’s tumble against China’s currency, known as the yuan or renminbi.
The company agreed at the end of 2006 to send 16 shipping containers of collapsible wood houses for use in gardens and at the beach. When the company finally completed the deal at the start of this year, the payment was in dollars that had lost nearly a tenth of their value in yuan.
Since the start of this year, “I quote prices in euros to all my European clients,” Mr. Ma said, adding that the company was also starting to make products for the Chinese market.
Mr. Ma’s company already sells 70 percent of its goods to Europe. Companies that sell mostly to the United States have not yet tried to set prices in euros.
Instead, Chen Mang, a manager at a musical instrument exporter, said his company now quoted dollar prices that were valid only for two or three months. That limits exposure to declines in the dollar over longer periods of time.
Making matters worse for many Chinese companies, American buyers have become tough negotiators as the American economy has slowed. “They’re just extremely sensitive to any price adjustment I make,” said Wang Ming Guang, a sales manager at a company that exports salt and pepper shakers and spice racks.
Chinese exporters face a double blow as the dollars that they earn buy fewer yuan even as Chinese workers are demanding fairly sizable wage increases, at least in percentage terms.
At the Jiangsu Easthigh Group Import and Export Company in Nanjing, workers’ monthly wages have risen in the last year to 1,800 renminbi, or $257, from 1,600 renminbi, said Stephen King, a salesman. The company makes elaborately carved wooden chairs, vases and Buddha statues.
The wage increase works out to 12.5 percent in renminbi terms, and nearly double that in dollar terms after the effects of the yuan’s appreciation are included.
Some European buyers have agreed to pay in euros, which protects them from the risk they previously took that the dollar would strengthen against the euro. But other European buyers have been so delighted with the fall in the dollar and the falling cost of dollar-denominated imports from China that they still insist on paying in dollars, said several Chinese exporters, who added that they had agreed to continue accepting dollars from these customers.
The Chinese currency has been fairly stable against the euro over the last several years, even as the dollar has fallen to 7 yuan, from 8.28 yuan in the summer of 2005. European Union officials have been increasingly vocal in recent months in demanding that China allow the yuan to rise against the euro as well.
China intervenes intensely in the currency markets to slow the rise of the yuan and preserve the competitiveness of Chinese goods in foreign markets. It has quintupled foreign reserves in the last five years, to $1.68 trillion last month.
Despite the hesitancy of American buyers, several exporters said that they were passing on sizable price increases for shipments to the United States.
Mr. Chen, the sales manager at a musical instrument company, the Shanghai Lansheng Grand Luck Import and Export Company, said his company had raised prices sharply — by 10 percent over the last year to offset the fall of the dollar, and by an additional 5 percent to cover rising costs in China for labor and raw materials.
Other exporters cited similar increases, part of a broader pattern of rising prices for goods from Asia that has prompted some economists to warn that the United States was starting to import inflation from the region.
SeaSunStar, a manufacturer of small fountains for the home and garden with their own recirculating water systems, sometimes needs many months to make special models. For deals closing at the end of this year, the company assumes the dollar will have fallen to 6.5 yuan, from 7 yuan now, said Charlie Xu, the sales manager.
Quite a few Chinese exporters are concluding that the best way to minimize currency risk may be to turn inward and sell more at home. Mark Yuan, the president and chief artist of the Hefei Hande Artistic Lamps Factory, which makes stained-glass lamps and windows, began selling his products in China just a few months ago and has found that these sales already account for 20 percent of total revenue.
“In big cities there is demand; people are wealthier,” Mr. Yuan said. “We are gradually increasing our emphasis on the domestic market until we can forget about the export market, because the profit margins on exports are so thin.”
Posted Wednesday, April 30, 2008
BARRON'S COVER
Commodities: Who's Behind the Boom?
By GENE EPSTEIN
MARCH 31, 2008
CHINA, AS EVERYONE KNOWS, IS A BIG FORCE IN THE extraordinary boom in commodities. Its voracious appetite for everything from corn and wheat to copper and oil has helped push up U.S. commodities prices by some 50% over the past 12 months.
But China is by no means the whole story. Speculators -- including small investors -- are also playing a huge role. Thanks to the proliferation of mutual funds and exchange-traded funds tied to commodities indexes, speculative buying has gone way beyond anything the domestic commodities markets have ever seen. By one estimate, index funds right now account for 40% of all bullish bets on commodities. The speculative juices are even more plentiful -- nearly 60% of bullish positions -- if you count the bets placed by traditional commodity "pools."
Here's the problem: The speculators' bullishness may be way overdone, in the process lifting prices far above fair value. If the speculators were to follow the commercial players -- the farmers, the food processors, the energy producers and others who trade daily in the physical commodities -- they'd be heading for the exits. For right now, the commercial players are betting on price declines more heavily than ever before, says independent analyst Steve Briese.
For example, in the 17 commodities that make up the Continuous Commodity Index, net short positions by the commercials have been running more than 30% higher than their previous net-short record, in March 2004.
Briese, author of the recent book The Commitments of Traders Bible and editor of the Website CommitmentsOfTraders.org, was one of the first to recognize that information on the bets made by the commercials could provide rare insights into how the "smart money" views the price outlook. These days, the data suggest, the smart money clearly believes that the market's exuberance has turned irrational.
Indeed, the great commodities bubble started springing its first leaks two weeks ago: Oil, gold and other major commodities posted their steepest weekly drop in half a century. Though prices have since firmed, they could eventually drop 30% as speculators retreat. The only real question is when.
IT'S NOT EASY TO SIZE UP THE influence of the index funds. But based on their known cash commitments in certain commodities, and the commodity indexes their prospectuses say they track, it is possible to estimate the size of their commitments in all commodities they buy. Using this method, analyst Briese (pronounced "breezy") estimates that the index funds hold about $211 billion worth of bets on the buy side in U.S. markets.
Applying a similar method, but with slightly different assumptions for indexes tracked, Bianco Research analyst Greg Blaha puts that figure at $194 billion. Either figure is enough to turn the index funds into the behemoths of the commodity pits, where total bullish positions now stand at $568 billion.
Commodities index funds, which arrived on the scene in the late 1990s, have come into their own in the past several years. The biggest index fund, Pimco Real Return, has seen its assets swell to $14.3 billion from $8 million since its inception in January 1997.
Index funds offer investors an easy, inexpensive way to gain exposure to a segment of the commodities markets or a broad-based basket of commodities. Result: The funds have drawn many private investors who have never ventured into futures, along with pension funds and other institutional players looking to diversify. But for all the virtues that the funds hold as a way of spreading bets across commodity markets, they take only long, or bullish, positions, avoiding short-selling. In other words, they trade on the naïve and potentially fatal assumption that commodities have the same tendency as stocks to rise over the long run.
That this large, bullishly oriented group of funds is flourishing is partly a result of a regulatory anomaly. In recognition of the fact that the commodity markets are too small to absorb an excess of speculative dollars, the Commodity Futures Trading Commission, in conjunction with exchanges, imposes position limits on speculators. But the agency has effectively exempted the index funds from position limits.
The dislocations caused by allowing so much money into markets that have limited liquidity is now causing alarm in the trading pits. That, in turn, is prompting the CFTC to call for an industry gathering April 22 at its Washington headquarters "to hear firsthand from participants to ensure that the exchanges are functioning properly." On this and related issues, CFTC Acting Chairman Walter Lukken declined to comment to Barron's.
Unless regulators clamp down, the index funds could become an even bigger force in the markets. In the midst of the recent sell-off, commodity bull Jim Rogers made that very point in an interview with Bloomberg News. Referring to the "over 70,000 mutual funds in the world" compared with the "fewer than 50" that now invest in commodities, he held out the prospect of a speculative bubble that could last for years.
In Rogers' view, the bull market is in the "fourth inning" of a "nine-inning baseball game." To which commodity bear Steve Briese counter-quips, "Maybe, but can't the game be called for a year or two, on account of rain?"
IN THE ORGANIZED COMMODITY MARKETS, trading is in futures and options, which are essentially two-way bets on the outlook for prices. For every buyer (a "long") of a future or options contract betting on a price rise, there is a seller (a "short"), taking the other side of the contract by betting on a price decline. Since speculators and commercials as a group can be either short or long, the charts (see the last page) track the net position -- longs minus shorts -- held by either group. Courtesy of Briese, the charts track net long or short positions in dollars, based on the dollar value of the commodity each futures or options contract covers.
The speculators, now so bullish, are mainly the index funds. To see how their influence on the market has become outsized, just look at how they operate. Nearly $9 out of every $10 of index-fund money is not traded directly on the commodity exchanges, but instead goes through dealers that belong to the International Swaps and Derivatives Association (ISDA). These swaps dealers lay off their speculative risk on the organized commodity markets, while effectively serving as market makers for the index funds. By using the ISDA as a conduit, the index funds get an exemption from position limits that are normally imposed on any other speculator, including the $1 in every $10 of index-fund money that does not go through the swaps dealers.
The purpose of position limits on speculators, which date back to 1936, is clearly stated in the rules: It's to protect these relatively small markets from price distortions. An exemption is offered only to "bona fide hedgers" (not to be confused with "hedge funds"), who take offsetting positions in the physical commodity.
The basic argument put forward by the CFTC for exempting swaps dealers is that they, too, are offsetting other positions -- those taken with the index funds.
Position limits on speculators, in some commodities specified by CFTC rules and in others by the exchanges, are generally quite liberal. For example, the position limit on wheat traded on the Chicago Board of Trade is set at 6,500 contracts. At an approximate value of $60,000 worth of wheat per contract, a speculator could command as much as $390 million of wheat and still not exceed the limit.
But at least one index fund that does trade the organized commodity markets directly and must therefore abide by the rules -- PowerShares DB Multi-Sector Commodity Trust (DBA) -- recently informed investors that it was bumping up against position limits and therefore would change its strategy.
No such information is available from individual swaps dealers. But based on CFTC data on their total position in a commodity like wheat, together with the fact that only four dealers account for 70% of all the trading from the ISDA, it is quite clear that if the exemption were ever rescinded, the dealers' trading in these markets would no longer be viable.
Speculators also use the older commodity pools, whose position is likewise tracked on the charts. The pools, open to sophisticated investors, are flexible enough to sell short as well as buy long and are subject to position limits. But since they are generally trend-followers, they will almost always go long in bull markets. Through most of the recent period, then, the pools have been adding to the price distortions caused by the index funds. Add the pools' bets to those of the index funds, and speculative money forms 58% of all bullish positions.
To get a further idea of the impact of these speculative bets, Barron's asked Briese to measure them against production in the underlying markets. He calculates that in soybeans, the index funds have effectively bought 36.6% of the domestic 2007 crop, and that if you add the commodity pools, the figure climbs to 59.1%. In wheat, the figures are even higher -- 62.3% for the index funds alone, and the figure jumps to a whopping 83.6% if you add the pools. Betting against them as never before are the commercials, who deal in the physical commodity.
The CFTC provides these figures on index trading for only 10 commodities. Why are such major commodities as crude oil, gold, and copper excluded? The agency's rationale, which even certain insiders question, is that it would be hard to get reliable information on these other commodities from the swaps dealers.
WHAT MIGHT FINALLY TRIGGER THE bursting of the commodities bubble?
One possible trigger was cited in a Barron's interview with Carl Weinberg of High Frequency Economics, published last week. Weinberg anticipated a break "some time this year" in industrial commodities, including crude oil, copper and natural gas once there is news of "even the slightest slowdown in the Chinese economy," the country whose insatiable demand, together with that of India, has been a rallying cry of the bullish speculators. When industrial commodities prove vulnerable, speculative money could start fleeing agricultural commodities, also.
Société Générale analyst Albert Edwards goes much further. Based on his view that the "Commodity bubble is nonsense on stilts," Edwards holds the "very strong conviction that before the end of this year, commodity prices...will be unraveling." He believes the triggering events will be the "unfolding U.S. consumer recession" and likelihood of "negative CPI [consumer price index] inflation rates."
A sudden turnaround in the dollar could be another trigger, notes Briese. By making dollar-denominated commodities ever cheaper in terms of other currencies, the collapsing dollar has been a legitimate bullish factor. "But the buck won't go down forever," Briese argues. "The same cycles that coincided with the dollar's major bottom in 1992 are due to make a low later this year. A rebounding dollar would pinch demand for dollar-denominated commodities."
Alternatively, to borrow a quip from the late humorist Art Buchwald -- who once explained that his candidate lost the election owing to "not enough votes" -- the bubble could burst from not enough buying. Brokerage houses have been advising their clients to allocate part of their portfolios to commodities, compared with allocations of zero several years ago. Even a shift of five percentage points would have been more than enough to account for the dollars that have fueled the "nonsense on stilts."
But what if the U.S. economy proves more resilient than currently thought, doesn't fall into recession, and instead starts growing again? The resulting rally in the stock market could send the allocation share back to zero and the bubble could burst, not with a bang, but with a whimper.
The CFTC could also prick the bubble by enforcing its own rules. If the agency were to rescind the exemption on position limits given to the index funds (say, on a phased basis, so that the funds could make an orderly retreat), prices would probably fall back to reflect their true supply-demand fundamentals.
Briese's analysis of commercial hedger positions leads him to believe that commodities in general were fully valued in terms of the fundamentals as of early September 2007. Based on the 24-commodity S&P Goldman Sachs Commodity Index, that would mean about a 30% collapse from present levels. But, he adds, "Given the tendency for prices to overshoot, commodity values could be cut in half before they stabilize."
Maybe it's time to start listening to the smart money.
Posted Wednesday, April 30, 2008
Stocks mostly end lower before Fed move, holiday
Shanghai stocks rally on strong financial earnings reports
By V. Phani Kumar
April 30, 2008
HONG KONG (MarketWatch) -- Asian markets ended mostly lower after a volatile session Wednesday, as investors turned cautious ahead of the U.S. Federal Reserve's decision on interest rates and locked in profits before a holiday in several regional markets.
Stocks in Japan, Hong Kong, India, South Korea, Australia, Singapore and Taiwan were volatile, while shares rallied in Shanghai after strong quarterly results from Industrial & Commercial Bank of China and Ping An Insurance (Group) Co. of China.
"I think it's more a matter of caution and people are acting defensively because there's going to be some big news and there is a holiday in most of Asia the next day," said Andrew Sullivan, sales trader at Mainfirst Securities in Hong Kong.
Stock markets in China, Hong Kong, India, Taiwan, Singapore, Thailand, Malaysia, Pakistan, Indonesia, Philippines and Vietnam are closed for a holiday Thursday.
In Tokyo, the Nikkei 225 Average finished 0.3% lower at 13,849.99 and the broader Topix index lost 0.2% to 1,358.65, after flirting with gains during the session.
Earlier in the day, the Bank of Japan left its benchmark short-term interest rate unchanged at 0.5%, as expected, amid signs the country's economy is faring better than expected and growing concerns over accelerating inflation.
In Hong Kong, the Hang Seng Index fell 0.6% to 25,770.13 in late afternoon trading, while the Hang Seng China Enterprises Index slipped 0.6% to 14,210.45. Both indexes rose earlier in the day, but couldn't hold on to the gains.
India's Sensitive Index, or Sensex, fell 0.2% to 17,352.87 in the afternoon, while the broader S&P/CNX Nifty gave up 0.3% to 5,178.
Australia's S&P/ASX 200, which fell sharply earlier in the day, recouped most of its losses and ended 0.2% lower at 5,595.40.
Elsewhere, South Korea's Kospi rose 0.8% to 1,825.47 and Taiwan's Weighted index advanced 0.3% to 8,919.92, on bargain buying after both fell sharply in the previous session. New Zealand's NZX 50 index added 0.5% to 3,624.78, while Singapore's Straits Times Index dropped 0.5% to 3,158.20 in the afternoon.
Although the Federal Open Markets Committee is widely expected to cut interest rates by a quarter-point, some analysts said the Fed could hold rates at the current level on worries about inflation.
Sullivan said a rate pause "could impact U.S. consumer confidence" and will be taken as a negative in Asia. "Asia is far more linked to the U.S. consumer through exports" than it is to oil prices, which are likely to cool on a stronger U.S. dollar if the Fed doesn't cut rates, he added.
Shanghai lifted by financials
China's Shanghai Composite was the best performer of the day, advancing 4.8% to 3,693.11, buoyed by strong earnings reports from financial companies Tuesday.
Shares of Ping An Insurance jumped 6.1% after it reported a better-than-expected 24% year-on-year growth in first quarter net income. The earnings also lifted sentiment as the company's larger rival China Life Insurance Co. reported more than a 60% drop in first quarter net income recently.
"(Ping An's) result continues to highlight the advantages of Ping An's unique diversified financial model," wrote Citigroup analysts in a report. "Interest income from banking operations rose 72.2% year-on-year, while fees from securities and asset management businesses managed to remain flat despite the weaker and falling activities of the A-share market (in Shanghai)."
Shares of ICBC, China's largest lender by assets, gained 3.3% after its quarterly profits soared 77% from the year-ago period. Shares of Bank of Communications rose 3.3% after its profit more than doubled on strong fee and net interest income.
In Hong Kong late afternoon trading, shares of Bank of Communications fell 2.1% and ICBC lost 0.2%, while Ping An Insurance climbed 2%.
Resources in play
Resource stocks reacted negatively to the sharp overnight drop in commodity prices.
In Tokyo, shares of Sumitomo Metal Mining slumped 7.8% and Inpex dropped 4.1%. In Sydney, BHP dropped 3.7% and Rio Tinto lost 3.6%.
Shares of Midwest Corp. climbed 2.6% in Sydney after the iron ore producer's board Tuesday unanimously recommended a sweetened takeover offer from China's Sinosteel, subject to a condition that more than half of Midwest shares were tendered.
Shares of Origin Energy surged 33.2%, after U.K. natural gas producer BG Group Plc offered to the buy the company for A$12.91 billion ($12 billion) in cash, reflecting a 40% premium to Origin's closing share price Tuesday.
Crude oil for June delivery rose as much as 35 cents to $115.98 a barrel in electronic trading, after sinking $3.12 to settle at $115.63 a barrel Tuesday on the New York Mercantile Exchange.
June gold futures fell $1.20 to $875.60 an ounce, after tumbling $18.70 to $876.80 an ounce on Nymex.
Regional detail
In Seoul, shares of Korean Air rose 3.3%, recouping some losses from the previous session, while banking stocks dropped after a broad overnight decline on Wall Street.
Korea Exchange Bank stock declined 2.9% in the volatile market, as investors shrugged off news that HSBC Holdings and Lone Star have agreed to extend the deadline on talks over the Korean lender's acquisition by three months to July 31. HSBC has offered $2.8 billion to acquire Lone Star's 51% stake in Korea Exchange Bank. Shares of HSBC rose 1% in Hong Kong.
In Tokyo, shares of Softbank Corp. advanced 2.2%, on a Nikkei report that it has agreed with Oak Pacific Interactive to buy around a 40% interest in the Chinese internet firm for about 40 billion yen ($385 million).
Shares of trading giant Mitsubishi Corp. fell 3.2% after it forecast a lower-than-expected 25% jump in net income for the current financial year started April 1.
Shares of Komatsu finished 1% higher, before it announced a 27% increase in net income for the previous financial year ended March, and forecast a 4.9% growth in net income for this year.
In Mumbai, shares of mortgage company Housing Development Finance Corp. shares fell 2.4% in the weak broad market, although it announced a 40% jump in fiscal fourth-quarter net income.
Software firms extended gains after the country's finance minister Tuesday proposed an extension of a tax-holiday available to software firms by one year to March 2010. Shares of Infosys Technologies climbed 2.1% and Tata Consultancy Services gained 1.5%.
In other news, Japan's industrial output dropped 3.1% in March from the previous month, on a decline in production of transport equipment and machinery, according to official data. A survey showed that industrial production is expected to fall further by 0.3% in April, before rising 3.4% in May, according to the ministry of economy, trade and industry.
In currency trading, the U.S. dollar was quoted at 103.96 yen, compared with 104 yen in New York late Tuesday.
On Wall Street, the Dow Jones Industrial Average fell 39 points to 12,831 as the broad market kept a cautious tone ahead of key announcements on interest rates by the Federal Reserve. The S&P 500 index fell 5.4 points to 1,390 and the Nasdaq Composite rose 1.7 points to 2,426.
Posted Wednesday, April 30, 2008
You have 7 years to learn Mandarin
Forget cheap imports. China's rise will soon be a force on Wall Street and Main Street and in Silicon Valley.
By Geoff Colvin
April 30, 2008
(Fortune Magazine) -- Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer's games, the event was meant to mark China's debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world's dominant economic superpower much sooner than expected - not in 2050, but in 2015.
While short-term investors are already cashing in on China's growth by playing the global commodities boom, smart long-term thinkers are contemplating what happens when China matures from an exporter of cheap goods to a competitor in sectors where the U.S. is dominant - technology, brand building, finance. China has almost wiped U.S. makers of low-value items like toys and socks, but by 2015 it may threaten Apple, J.P. Morgan Chase, and Procter & Gamble. It will increasingly influence the S&P 500 and the mutual funds in our 401(k)s. So it's worth looking at how that will happen, what it means, and what anyone can do in the seven years before the baton is passed.
Just using the exchange rate to convert China's GDP into dollars isn't helpful in comparing the two economies, because China controls its exchange rate; by that method, China's economy might not pass America's for decades. Exchange rates apply only to tradable products and services; they aren't very useful in valuing nontradable goods in a country like China that is much poorer than the United States. So we need some way to compare the real value of China's economic output with America's, and economists have developed one. It is called purchasing power parity.
For example, Chinese construction workers earn a whole lot less than Americans do, yet they can still build top-quality buildings. If we used the exchange rate, the value of a new skyscraper in Shanghai would count much less toward China's GDP than an identical building in Chicago would count toward America's, which makes no sense. Purchasing power parity corrects the problem.
Will China take the crown?
Angus Maddison's forecast (which uses purchasing power parity) isn't built on outlandish assumptions. He assumes China's growth will slow way down year by year, and America's will average about 2.6% annually, which seems reasonable. But because China has grown so stupendously during the past decade, it should still be able to take the crown in just seven more years.
If that happens, America will close out a 125-year run as the No. 1 economy. We assumed the title in 1890 from - guess who. Britain? France? No. The world's largest economy until 1890 was China's. That's why Maddison says he expects China to "resume its natural role as the world's largest economy by 2015." That scenario makes sense.
China was the largest economy for centuries because everyone had the same type of economy - subsistence - and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.
So how should we make the most of our seven-year grace period? For companies: Focus on getting better at your highest-value activities. Just because the Chinese will be fighting you in the same industries doesn't mean you'll lose. (Investors, remember that China bought $3 billion of Blackstone at the IPO price of $31 last summer, and the firm is now trading at $19.) It only means you'll have to work harder to win.
For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost. For government leaders: Improve U.S. education above all.
Those are the issues in China's becoming No. 1 that we most need to focus on. And as with so much else in China's recent history, we'll need to worry about them much sooner than we expected.
Posted Thursday, May 01, 2008
Stocks up after corporate results better than feared
Less-than-expected losses from General Motors bolsters blue chips
By Kate Gibson
Last update: 12:21 p.m. EDT April 30, 2008
NEW YORK (MarketWatch) -- U.S. stock indexes pulled strongly higher Wednesday on first-quarter economic growth numbers and as consumer-products giant Proctor & Gamble Co. and automaker General Motors Corp. reported better-than-anticipated results.
"The market continues its retesting of recent highs with Proctor & Gamble and GM numbers leading the way -- things are weak, but it's an expectations game; corporate earnings are sluggish, but people are buying stocks on the belief the worst is over," said Peter Boockvar, equity strategist at Miller Tabak.
"That's what bear-market rallies are all about, hopes and wishes the worst is over," said Boockvar, who does not himself subscribe to the view.
The Dow Jones Industrial Average rose 116.18 points to 12,948.12, with 28 of its 30 components trading higher.
The blue-chip advance was led by GM recently up 13.1% after the automaker reported a first-quarter net loss of $3.25 billion, or $5.74 a share, compared with net income of $62 million a year earlier. Its adjusted loss of 62 cents a share, however, was well ahead of the $1.60-a-share loss analysts were expecting.
Also bolstering the Dow, shares of Proctor & Gamble climbed 3.7% after the consumer-products giant reported earnings that topped forecasts.
The S&P 500 gained 7.25 points to 1,398.19, while the Nasdaq Composite climbed 16.41 points to 2,442.51.
Also in play were expectations of another Federal Reserve interest-rate cut of a quarter of a percentage point, to 2%. The central bank is slated to release its decision at 2:15 p.m. Eastern.
"The market is pricing in an 80% chance that the Fed cuts rates 0.25%. The dollar is likely to continue strengthening if the Fed signals an end to rate cuts after an expected reduction today. Many believe this will also cause commodity prices to fall," said James Hyland, an analyst with Wachovia Corp.
But Art Hogan, chief market strategist at Jefferies & Co., believes there is "a credible possibility that the Fed could stand pat" and leave rates unchanged, saying stronger-than-expected U.S. economic growth in the first quarter offered cover for such a move.
Ahead of the opening bell, data showed the U.S. economy grew at an annual rate of 0.6% in the first three months of the year, topping the 0.2% growth expected by economists.
Also, companies in the U.S. private sector added 10,000 jobs in April, according to the ADP employment report. Economists had expected ADP to drop by 55,000 in April.
Volume on the New York Stock Exchange topped 1.5 billion, while 705 million shares were traded on the Nasdaq, with advancing stocks ahead of those declining by roughly 2 to 1 on both exchanges.
On the New York Mercantile Exchange, crude-oil futures reversed course after making early gains, with the contract for June delivery off $2.02 at $113.58 a barrel in a carryover of Tuesday's retreat.
Also on the move, shares of Citigroup shed 3%.
Late Tuesday, the blue-chip financial giant said it's raising $3 billion selling new common shares as its tries to rebuild capital after huge losses from the credit crunch. However, Citigroup said it ended up raising $4.5 billion in light of strong demand.
Japan's Nikkei 225 Average closed 0.3% lower overnight. The Bank of Japan left its key interest rate on hold, as expected.
As for European markets, bourses were higher ahead of the Fed's rate decision, with the German DAX 30 index up 0.6%.
U.S. stocks ended mostly lower on Tuesday, though the technology sector was lifted by upbeat earnings from Corning. While the Dow Jones Industrial Average ended down 39 points, the technology-focused Nasdaq Composite rose 1.7 points.
Posted Thursday, May 01, 2008
Economy grows by only 0.6 percent in 1st quarter of 2008
By Jeannine Aversa
April 30, 2008
WASHINGTON - The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.
The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.
Many analysts were predicting that the gross domestic product (GDP) would weaken a bit more — to a pace of just 0.5 percent — in the first quarter. Earlier this year, some economists thought the economy would actually lurch into reverse during the opening quarter. Now, they say they believe that will likely happen during the current April-to-June period.
"The economy is weak but not collapsing," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "A recession can't be ruled out, although the stars are not lined up at this point to definitively say one way or the other."
Gross domestic product measures the value of all goods and services produced within the United States and is the best measure of the country's economic health. Voters are keenly worried about the country's economic problems and so are politicians — in Congress, in the White House and on the campaign trail.
The housing situation turned more bleak in the first quarter, as record-high foreclosures dumped more unsold homes on the market, adding to builders' headaches. Builders slashed spending on housing projects by a whopping 26.7 percent, on an annualized basis, the most in 27 years. That was the big drag on the economy.
Consumers — whose spending is vital to the country's economic health — turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1 percent pace. That was down from a 2.3 percent growth rate and was the slowest since the second quarter of 2001, when the United States was suffering through its last recession.
Soaring energy and food prices are walloping people's pocketbooks, leaving them with less to spend on other things. The credit crunch also has made it harder for people to finance big ticket items, such as cars and homes. And, many homeowners — watching their homes — often their single-biggest asset — slump in value, also are feeling less wealthy and less inclined to spend.
Another report from the Labor Department Wednesday showed that workers' compensation — including wages and benefits — grew 0.7 percent in the first quarter, the slowest pace in two years. Many economists were expecting a 0.8 percent rise. The report suggests that the weak labor market is making employers a bit less generous with their compensation.
Businesses, meanwhile, cut back spending on equipment and software at a 0.7 percent pace, the most since the final quarter of 2006. And, they trimmed spending on commercial construction at a 6.2 percent pace, the most since the third quarter of 2005.
However, businesses boosted their investment in building up stocks of supplies in the first quarter, a big force adding to GDP. Exports of U.S. goods and services also helped first-quarter growth. U.S. exports are being helped by the falling value of the U.S. dollar, which makes U.S. made goods and services less expensive to foreign buyers.
Spending by the government was another factor helping out GDP in the first quarter. That spending rose at a 2 percent pace for the second quarter in a row.
To bolster the economy, the Federal Reserve is expected to lower a key interest rate by one-quarter percentage point to 2 percent later Wednesday. That would mark a more moderate-sized rate reduction after a recent string of hefty cuts. Many economists believe the Fed, which started dropping rates last September, may be nearing the end of its rate-cutting campaign because policymakers don't want to aggravate inflation. Those rate reductions, which take months to affect economic activity, can sow the seeds of inflation down the road.
An inflation measure linked to the GDP report showed that prices grew at a rate of 3.5 percent in the first quarter, down from a 3.9 percent pace in the prior quarter.
Another gauge showed that the core prices excluding food and energy rose at a rate of 2.2 percent in the first quarter. That was a lower than the 2.5 percent pace registered in the fourth quarter but still outside the Fed's comfort zone. The upper level of the Fed's inflation tolerance is 2 percent.
Gas and food prices, however, have moved higher since the start of the year, adding to inflation pressures. Gasoline prices, which have recently set new record highs, have climbed to $4 a gallon in some parts of the country.
A growing number of economists believe the economy is in a recession and is indeed contracting now.
Under one rough rule, if the economy contracts for six straight months it is considered to be in a recession. That didn't happen in the last recession — in 2001— though. A panel of experts at the National Bureau of Economic Research that determines when U.S. recessions begin and end uses a broader definition, taking into account income, employment and other barometers. That finding is usually made well after the fact.
During the first three months of this year, job losses neared the staggering quarter-million mark. The unemployment rate has climbed to 5.1 percent and is expected to move higher in the coming months.
Fed Chairman Ben Bernanke, earlier this month, acknowledged for the first time that a recession this year was possible.
President Bush on Tuesday said the country was dealing with "difficult times." Bush said he understood Americans' anxiety over soaring gas prices, record-high home foreclosures and other economic woes.
The government's $168 billion economic-stimulus package — including tax rebates that started flowing to bank accounts on Monday — should help energize the economy in the second half of this year, the Bush administration and Federal Reserve officials say. Democrats in Congress insist more relief needs to be provided, including additional unemployment benefits to cushion the pain of joblessness. The administration has resisted, saying the rebates and other stimulative efforts should be sufficient once they fully kick in.
Posted Thursday, May 01, 2008
歌曲：Forever friend (In Harmony)
作曲：莫洛德尔、孔祥东
作词：Michael Kunze
演唱：李玟、孙楠
歌词：
You've tasted bitter defeat and the sweet success.
You want it all and you settle for nothing less.
You've tried harder than the rest.
You've become one of the best.
This is the time you'll remember for
All your life
Forever friends
In harmony
As the whole world joins and sees
Days of unity and peace.
Forever through the years
We'll hear the cheers.
Joy and laughter everywhere!
We're together here to share
Forever friends
You'll meet all races, see faces you've never seen.
People from parts of the world where you've never been.
And you'll feel it in your heart
We spent too much time apart
This is the time when all dreams of man come alive.
Bridge
(No matter where we are or go)
(No matter what we hope for or know)
(No matter how we word our prayer)
(There is one dream we share)
Ending
One world One Dream
Forever friends
In Harmony!
Forever Friedns
(One dream we dream,)
(One world we share.)
Posted Thursday, May 01, 2008
偏偏喜欢你 - 陈百强 - Danny Chan - Only Like You
愁绪挥不去苦闷散不去
为何我心一片空虚
感情已失去一切都失去
满腔恨愁不可消除
为何你的嘴里总是那一句
为何我的心不会死
明白到爱失去一切都失去
我又为何偏偏喜欢你
爱已是负累相爱似受罪
心底如今满苦泪
旧日情如醉此际怕再追
偏偏痴心想见你
为何我心分秒想著过去
为何你一点都不记起
情义已失去恩爱都失去
我却为何偏偏喜欢你
情义已失去恩爱都失去
我却为何偏偏喜欢你
Posted Thursday, May 01, 2008
情人别离去 - 許冠傑
曲：P.Vance/E.Snyder
詞：許冠英
情人离别去 浓情如梦碎
从前曾共你 相依相对
爱已化烟再不相聚
空记柔情似水
良缘难共订 瑶琴谁伴听
离愁肠断 百感交迸
怕对故苑倍感幽静
孤雁独鸣怨声
以往与你恩爱伴随
鸳鸯侣 长廝对
爱已远去悲痛洒泪
念情缘不胜唏嘘
寒弹长夜叫 床前残月照
何时能望再举杯欢笑
我俩爱火已不娇耀
空叹旧情飘渺
我俩爱火已不娇耀
空叹旧情飘渺
Posted Thursday, May 01, 2008
朋友 - 谭咏麟
曲: Hiroaki Serizawa（芹泽广明）
词: 向雪怀
繁星流动和你同路
从不相识开始心接近
默默以真挚待人
人生如梦朋友如雾
难得知心几经风暴
为着我不退半步正是你
遥遥晚空点点星光息息相关
你我那怕荆棘铺满路
替我解开心中的孤单
是谁明白我
情同两手一起开心一起悲伤
彼此分担总不分我或你
你为了我我为了你
共赴患难绝望里紧握你手
朋友
Posted Thursday, May 01, 2008
阳光总在风雨后 - (许美静&杜克)
人生路上甜苦和喜忧
愿与你分担所有
难免曾经跌倒和等候
要勇敢的抬头
谁愿常躲在避风的港口
宁有波涛汹涌的自由
愿是你心中灯塔的守候
在迷雾中让你看透
阳光总在风雨后
乌云上有睛空
珍惜所有的感动
每一份希望在你手中
阳光总在风雨后
请相信有彩虹
风风雨雨都接受
我一直会在你的左右
Posted Thursday, May 01, 2008
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