KUALA LUMPUR, March 4 (Reuters) - Malaysian crude palm oil futures dived 5.8 percent on Tuesday after an earlier record high as investors pocketed profits on fears of a possible Beijing move to cap vegetable oil prices, traders said.
The benchmark May contract on the Bursa Malaysia Derivatives Exchange fell as much as 250 ringgit to 4,080 Malaysian ringgit ($1,277) per tonne, after surging 3.6 percent to an all-time high of 4,486 ringgit.
“The trigger for this wave of profit taking comes from Dalian soyoil,” said a Malaysian palm oil trader with a foreign commodities broker.
“Big gains in soyoil have been made and investors want to get some cash in the pockets before the next price rally starts all over again,” he added.
Chicago soyoil futures fell from record highs in Asian trade on Tuesday after Dalian soyoil futures suffered large losses after days of rallying by their daily limits.
Traders in China said the domestic market was worried that Beijing would introduce new measures due to fears of inflation after jumps in physical vegetable oil prices to record highs.
But analysts said profit taking was temporary and the hedge funds were still in the market to make gains on palm oil, which is still up 33 percent so far this year.
“The activities in the Malaysian palm oil futures market have been dominated by hedge funds but the fundamentals of growing demand and tightness in global vegetable oil supplies are rock solid,” said Fordyanto Widjaja, an analyst with Morgan Stanley.
On Monday, crude oil hit another record high at $103.95 on expectations that OPEC will rebuff calls for more output this week and after the dollar briefly touched new lows against other major currencies.
And U.S. soybean and soyoil futures soared to all-time highs on Monday as a result of Chinese demand for vegoils and broad-based buying of commodities by speculators.
Global vegetable oil prices often track energy markets as rapeseed and soybean oils are converted into biodiesel in Europe and America. This puts more pressure on palm oil to satisfy food demand as shipments to Europe and other regions rise. ($1=3.196 Ringgit)
EVERY day, stock market players either log on to the Singapore Exchange's website or Teletext to check the state of the market. Apart from looking at indices and individual prices, most would also glance at the number of rises and falls, or to give it its popular term, the advance-decline score, since this gives an idea of the strength or weakness in the broad market.
Unfortunately, the figures convey the wrong picture. Why? Hundreds of warrants are included, which causes a distortion that should be corrected.
Last Friday, for example, the SGX website and Teletext showed 273 rises, 414 falls and 1,124 items unchanged. The first misrepresentation was that there are a total of 1,811 listed entities on SGX when the correct figure, stripping out warrants, is only around 800.
The second was that the ratio of advances to declines was 0.65 (273/414) when the correct figure, minus warrants, was 0.76 (182/240).
In other words, as far as Friday's session was concerned, the inclusion of warrants in the market's statistics gave the impression that the broad market was weaker than it really was - perhaps surprising, given that the Straits Times Index dropped 48 points to 3,026 that day.
Similarly, yesterday's gainers/losers figures on SGX's homepage were 152-577 for a ratio of 0.26 when the correct numbers, excluding warrants, were 64-391, for a ratio of 0.16. Again, the wrong impression - the market seemed stronger than it really was.
To see how the figures are distorted, consider, for example, that there are about 50 warrants in issue on CapitaLand shares, of which around 35 are calls that gain when the shares rise, and 15 puts that gain when the shares fall.
Assuming warrant prices behave in the manner expected of them, that is, market makers do a proper job in setting prices, then when CapitaLand shares rise, the 'advances' figure increases by 36 items while the 'declines' figure drops by 15.
Conversely, a drop in CapitaLand shares means 15 rises and 36 falls are wrongly added to the advance-decline score.
Factor in the fact that stocks such as SingTel and Cosco and indices such as the Hang Seng and STI have as many warrants on them as CapitaLand, and the full extent of the distortion can be appreciated. Not only is the picture distorted, traders and technical analysts are unable to map out trends in the broad market across time because warrant numbers are constantly changing - every few days, major warrant issuers like Macquarie, Deutsche and SG issue new instruments while simultaneously, there may be other warrants expiring.
If the total number of warrants changes from day to day, and if their inclusion distorts the picture significantly, then surely in the interests of accuracy, it's best to disclose the performance of warrants separately?
To be fair, warrant figures are disclosed in the summary pages under the heading 'Loans and debentures' - interestingly, warrants are neither loans nor debentures and viewers would have to do subtraction to arrive at the correct figures. For the sake of accuracy and convenience, warrant figures should therefore be removed from homepages right from the start.
While we're on the topic of removing warrant data, is there any point in including warrants in the top percentage gainer and losers lists that appear on Teletext every day?
In yesterday's session, for example, 19 out of the top 20 percentage gainers were index warrants on the Straits Times, Hang Seng, Nikkei and KL indices (mainly puts, of course, given the sharp plunge).
The range of gains was 25-200 per cent, a seemingly impressive showing but ultimately useless from an informational content point of view, particularly since the majority of investors do not trade warrants - warrant volume in dollars yesterday made up only 4.6 per cent of the total.
Had warrants been excluded and the lists focused solely on stocks, investors would have seen that United Engineers was among the day's top percentage gainers with a rise of about 4 per cent, or that WBL gained almost 9 per cent. In a day when the STI lost almost 100 points or 3.3 per cent, surely this is more useful to investors.
As with all forms of disclosure, the ultimate aim has to be to convey as accurate a picture of the market's performance as possible. This cannot be the case if movements in almost 1,000 warrants are included in the daily statistics. It's therefore best to report the performance of the warrant segment separately and not allow it to distort the picture as is the case now.
SINGAPORE'S once booming real estate investment trusts (Reits) may face a round of mergers to weed out the weak who find it increasingly tough to raise funds and refinance loans because of the global credit crisis.
At least six of Singapore's 20 listed Reits are valued below what their properties are worth, as are many trusts in Japan and Australia, which means expansion is hampered by higher financing costs and investor returns are limited.
Some of the trusts will face higher interest payments when they need to refinance their debt in coming months, leading to lower earnings and distribution to unitholders.
'I would expect consolidation to gather pace in the course of the next 6 to 12 months,' said Mr Tony Darwell, head of Asian equity research at Nomura. 'The cost of debt has risen and it is impacting everyone, especially entities that are highly geared.'
For investors, many of whom are already steering clear of property and other assets that rely on debt financing, the takeover speculation means some Reits such as Macquarie MEAG Prime may get bid up to prices closer to book value.
But others such as Mapletree Logistics Trust could see their shares fall further, due to large amounts of debt on their books.
'Singapore's Reit market is still very young and shouldn't have reached the stage for consolidation, but the situation now is quite conducive (to that),' said Credit Suisse analyst Tricia Song.
Singapore's market for property trusts, Asia's third largest, has grown rapidly since 2002 when the first Reit, CapitaMall Trust , went to market. The industry has since grown to 20 Reits worth US$19 billion (S$26 billion), although that number may shrink as at least two players are up for sale.
Acquisition targets include Reits trading at high yields, at large discounts to book value, or with quality assets that bigger funds could be interested in, Mr Song said.
Industry experts say the first Singapore Reits that may be taken over will be those that have ties to firms or property funds in Australia, Asia's biggest property trust market.
Macquarie MEAG Prime REIT , which owns two large properties on Singapore's Orchard Road shopping belt, said it may sell assets or go private after main shareholder Macquarie received unsolicited offers for its 26 per cent stake.
Allco Commercial Reit, which owns office properties in Singapore and Australia, is being closely watched as its Australian parent, Allco Finance , is trying to sell assets to meet debt repayment deadlines.
'The yield is so high at 9 percent; Allco Reit can't raise capital and their debt is due soon. They need to do something soon,' said a hedge fund manager, who asked not to be identified.
Downgrades
Allco in November dropped plans for a $150 million share sale due to weak markets. In January, Moody's cut its credit rating to Ba1, or junk, from a Baa3 investment grade rating, citing potential problems in refinancing $550 million in short-term debt due in July.
Other Reits downgraded or placed on review for downgrade this year include MMP, Mapletree Logistics Trust and Suntec Reit, on concerns of refinancing risks.
Suntec Reit last week closed a 5-year convertible bond issue worth $250 million at a 4.25 per cent yield to maturity, much higher than its average financing cost of 3.13 per cent as of end-December.
'Credit spreads have widened significantly over the past month. We believe this is likely to place pressure on both the cost and availability of future debt,' Merrill Lynch analyst Melinda Baxter said in a note to clients last week.
Aside from Macquarie and Allco, other Singapore Reits that could be privatised or sold include Cambridge Industrial Trust and MacArthurCook Industrial Reit, which lack a strong parent to block any takeover bid, analysts said.
'There are some independent Reits out there and there could be some M&A activity,' said Mr Mark Ebbinghaus, head of Asian real estate investment banking at UBS. 'I wouldn't say that there is going to be wholesale M&A in the sector.'
Despite the difficulty in raising equity and the need to refinance debt, acquisition talks have helped lift Reit share prices. MMP's share price has rebounded 30 per cent from record lows in January, while Allco is up 26 per cent.
But finding the right buyer could take time.
Tycoon Kwek Leng Beng, who runs Singapore's second-biggest property firm City Developments, declined to confirm talks with Allco or MMP, but said he would only consider buying if the sale includes the Reit manager, which he sees as more profitable.
'We'll be happy to look at it. But if you sell me a Reit without the management company, I say goodbye to you, I'm not interested,' said Mr Kwek, Singapore's fifth-richest man.
Consolidation would leave a sector with fewer, but larger Reits that have greater financial capacity to expand abroad.
This development would follow Australia, whose Reit market expanded from 20 listed trusts in 1994 to 51 in 1999, and has since shrunk to 34 trusts that have three times more assets.
'Singapore is not going to take 40 years to get to where Australia is. The Reit market will mature at a much faster rate, although there is still a lot more scope to grow in total size,' said Nomura's Darwell. -- REUTERS
ICICI Bank Loses $264 Million on Overseas Investments
By M.C. Govardhana Rangan and Kartik Goyal
March 4 (Bloomberg) -- ICICI Bank Ltd., India's second- largest bank, reported $264 million of costs to write down the value of overseas investments, the biggest loss disclosed by an Indian bank since the collapse of the U.S. subprime market.
ICICI set aside $90 million through December and $70 million will be earmarked in fourth-quarter earnings, said Chanda Kochhar, ICICI joint managing director, in a telephone interview. The rest will be set off against the bank's net worth.
The Mumbai-based bank slumped as much as 9.3 percent on the Bombay Stock Exchange after Junior Finance Minister Pawan Kumar Bansal disclosed the loss in parliament today. Shares closed 5.2 percent lower at 971.60 rupees.
``The quantum of the loss comes as a surprise and has unnerved the market and traders,'' said Rajesh Jain, chief executive officer at Pranav Securities Ltd. ``Investors know from experience that such signs are always the tip of the iceberg.''
ICICI joins banks from Wall Street to Japan to Europe that have taken losses on subprime mortgages. So far, 45 of the world's biggest banks and securities firms have written down or lost $181 billion related to investments tied to rising defaults on U.S. home loans to people with poor credit histories.
The company has the largest holdings of overseas investments among the nation's major banks and has been expanding internationally to counter slowing demand for credit in India. The value of the subprime-related investments in its $2 billion of overseas assets dropped because investors are shunning all except for the safest securities, Kochhar said.
Profit Increase
Bansal said there's no sign of large-scale credit losses among Indian banks.
``Following the subprime crisis overseas, ICICI Bank's overseas operations had reported marked-to-market losses of $264.34 million on account of its exposure to credit derivatives and investments as on'' Jan. 31, 2008, Bansal said in reply to a question in parliament in New Delhi.
ICICI Bank's profit rose 35 percent to 12.3 billion rupees ($305 million) in the quarter ended Dec. 31, the bank said in January, beating analyst estimates.
``If it's limited to marked-to-market and not credit losses, it should not affect the operations significantly,'' said Sandip Sabharwal, chief investment officer at J.M. Mutual Fund, which manages about $3 billion in assets.
State Bank of India, the nation's largest by assets, lost 2.6 percent to 1,873.95 rupees. HDFC Bank Ltd. slid 2.4 percent to 1,357.30.
Bank's Owners
Singapore government investment funds are the single largest holders in ICICI Bank, with about a 9 percent stake. Temasek Holdings Pte, through Allamanda Investments Pvt, owns 7.6 percent, and the Government of Singapore Investment Corp. 1.4 percent, according to the latest regulatory filings.
``So far, no specific instance of significant losses suffered by large financial institutions in India, especially from subprime mortgages in the U.S., has been noticed,'' Bansal said.
Templeton files complaint on S'pore AsiaPharm deal
Mar 04, 2008
Templeton Asset Management, which is opposing the takeover of Chinese drug company AsiaPharm by MBK Partners, has complained to Singapore's corporate regulator alleging the proposed S$357 million ($256.8 million) deal was unfair to minority shareholders.
"We don't think full and fair disclosure has been made for all agreements that are required by the law," Mark Mobius, the firm's top fund manager for emerging markets, told Reuters on Tuesday.
He said the fund manager has complained to the Securities Industry Council , alleging that information vital for minority shareholders to make a prudent decision has been withheld.
The complaint was filed against LuYe Pharmaceutical, a unit of MBK Partners, an Asia-focused private equity firm, and AsiaPharm director Liu Dianbo, Templeton said.
"They must explain... why are they buying these shares, why are they going into this venture with MBK and why are they offering this price, which we consider a very low price," Mobius said.
The SIC said it would not discuss dealings with individual parties in a takeover offer, while a public relations firm representing LuYe also declined comment. Attempts to reach AsiaPharm director Liu were unsuccessful.
Templeton, which owns about four percent of AsiaPharm's stock, said in a statement on Monday that LuYe's offer price of S$0.725 a share "substantially undervalues" the Chinese firm's shares.
The investment firm had bought the shares for S$0.8032 in May 2006, according to previous press releases.
In the interview with Reuters, Mobius alleged agreements were made between MBK and AsiaPharm directors, including Liu. Details of these pacts had to be disclosed so that minority shareholders could make a an informed decision, he said. -- REUTERS
SINGAPORE (AFP) — Terrorism is usually no laughing matter, especially not in security-conscious Singapore, but the escape from custody of a limping Islamist extremist suspect has led to scorn on the Internet.
Barbed jokes and irreverent spoofs have sprouted up on websites five days after Mas Selamat bin Kastari, the alleged Singapore chief of regional terror group Jemaah Islamiyah, escaped with apparent ease from a detention centre.
"Toilet Break, based on a true story starring Mas Selamat Kastari," read a mock post on one wesbite by a blogger inspired by the hit US television drama "Prison Break".
Blogger Philip Chua wrote: "Singapore has now dropped the ball big time and really is an international laughing stock."
"You don't see prisoners escaping from terrorist detention centres in the West or Guantanamo. More so a leader of the terrorist network in the country next to you!"
Kastari, who was arrested in neighbouring Indonesia in 2006 and turned over to Singapore, remained at large Monday and officials said he was likely to be still hiding in this multiracial island republic of 4.7 million people.
Accused of plotting to hijack a plane in order to crash it into Singapore's Changi airport in 2001, Kastari managed to escape after asking to go to the toilet during a family visit, security officials said.
Direct criticism of the government is rare in the mainstream media, forcing dissatisfied Singaporeans to resort to the Internet to express their views.
Teoh Khengze, a Singapore-based author and journalist, wrote on his blog that the circumstances of what he called "The Great Singapore Escape" were "as incredulous as the escape is audacious."
Talkingcock.com, a popular satirical site, said Kastari's escape underlined the need to give cabinet ministers another salary hike even though they were already among the highest-paid in the world.
"We need to equip our Mini-stars with everything they can to deal with this crisis... and as we know in Singapore, public service and legislative influence are all not sufficient incentives," it said.
"Only the highest salaries in the world will do," the humour site said.
It showed 13 doctored photographs of Kastari in various possible disguises -- in a blonde woman's wig, a 1960s-style Afro hairdo and aviator sunglasses, a handlebar moustache and a beard and turban in Osama bin Laden style.
A popular Singaporean blogger who has previously irked the government with attacks on high living costs said the city-state need not worry about losing cabinet ministers.
"They won't be asked to resign or even take a pay cut," wrote the blogger known as Mr. Brown.
"We are not like those free-wheeling and chaotic governments from Western democracies that make their leaders accountable for every little thing."
Shortages of goods from oil to zinc and lead are looming
By ANTHONY ROWLEY March 4, 2008
NOT even the prospect of a simultaneous slowdown or recession in the world's first and second largest economies, the US and Japan respectively, and of looming problems in China can dent the enthusiasm of guru Jim Rogers for investment in what he calls the as yet 'untouched asset class' of commodities.
A Singapore resident nowadays, Mr Rogers sees his passion for commodities as an adventure as much as an investment.
He has driven half way around the globe by car and through Africa on a motorbike to see for himself how the world really works, and in the process come to the conclusion that, in the end, only natural resources have lasting - and appreciating - value.
It has led him to some stark conclusions, including a belief that agricultural commodities will 'explode' as food wars threaten and that shortages of everything from oil to zinc and lead are looming.
Speaking (performing is perhaps a better word given his entertaining and flamboyant presentation) in Tokyo last week, the septuagenarian Mr Rogers acknowledged that the prospect of recession in at least some major industrialised countries could dent demand for commodities somewhat.
But he claimed that the price of base metals has already discounted the possibility of recession and that the 'secular' bull market in commodities remains intact.
He attracts attention and very large audiences by virtue of the fact that he has personally made a lot of money out of commodities, by knowing when to buy and when to sell. Several hundred fund managers from around the region hung on his every word at last week's event, wanting his views not only on commodities but on everything from the yen to Russian stocks
On the former he did not hesitate. The yen can only 'go through the roof' once the carry trades (selling yen for finance investment in other currencies) come to an end, which they surely will before long, he suggested.
But as for Russian stocks Mr Rogers confessed himself ill at ease with what he called Russia's 'outlaw capitalism', despite the fact that his globe-trotting has taken him through some pretty wild and woolly regions of the world.
China is a different story, insisted the Sinophile American who moved from New York to Singapore to be in a Chinese environment where the eldest of his two very young daughters is already fluent in mandarin thanks to her Chinese governess.
Any setback in China, such as the fact that its speculative bubble in real estate 'will go bust either this year or next' should be seen as a buying opportunity, he said.
'When there are problems in China, don't think that's the end of the story.' Unlike other powers that have emerged throughout history - the Roman or British empires, for example - China has 'had recurring periods of greatness', he noted. The current one will not be stopped or slowed for long by setbacks in other parts of the global economy, and that in turn will continue to underpin a commodities boom that should last until 2020, he suggested.
He was not quite so flattering about his native America - or about the dollar. America is 'out of control', insisted Mr Rogers adding to its existing US$13 trillion of foreign debt at the rate of US$1 trillion every 15 months' and printing money as though there were no tomorrow, he said. 'This is a terrible policy,' he added, accusing Federal Reserve governor Ben Bernanke of 'knowing nothing about economics, currencies or business'. As a result, the dollar is in decline 'and you've not seen anything yet', he said.
Iran and Venezuela are not the only oil producers who want out from the dollar, said Mr Rogers. But in whatever currency oil is priced, it can only go up from here onward, he suggested. Investment in oil production, as in other basic commodities and raw materials, lags far behind demand and meanwhile global oil reserves are declining, said Mr Rogers.
Not only energy investments are wise but also a punt on natural fibres and yarns should pay off in the future as the prices of synthetics rise in sympathy with oil.
A falling dollar will feed into rising commodity prices, as will current inflationary trends, and that certainly includes the price of gold, Mr Rogers suggested. But agricultural commodities and foodstuffs will be the new gold of the future.
Demographic, climatic and environmental changes will be enormous upward pressures of global food prices, and trigger conflicts in some regions. Any kind of food investment now should pay rich dividends in the future.
The bull market in equities is over and bonds are likely to be in a bear market for years, with inflation running ahead of yields, he insisted. This is the dawning of the age of commodities, the guru added.
Gulf investors not enough to rescue Citigroup: Dubai
Tue Mar 4, 2008 7:58am EST
DUBAI (Reuters) - Gulf investment agency Dubai International Capital (DIC) said on Tuesday it would take "a lot more money" to rescue Citigroup Inc following investments from Abu Dhabi, Kuwait and Saudi Arabia's Prince Alwaleed.
Sameer al-Ansari, chief executive officer of the investment agency owned by the ruler of Dubai, was asked by Reuters what it would take to rescue the bank.
Dubai International Capital, which manages about $13 billion of assets, has invested in HSBC Holdings Plc and India's ICICI Bank
"It's going to take more than that to rescue Citi," he had earlier told a private equity financial conference.
The Abu Dhabi Investment Authority, a sovereign wealth fund owned by the world's fifth-largest oil exporter, last year bought a 4.9 percent stake in Citigroup, which has been hammered by write-downs linked to the U.S. subprime mortgage crisis.
The Kuwait Investment Authority said in January it would invest $3 billion in Citigroup.
Citigroup suffered a record $9.83 billion fourth-quarter loss tied mainly to mortgage write-downs.
Australia's big four banks, which control the bulk of New Zealand's banking assets, might need to triple bad debt provisions due to their exposure to financially troubled firms, analysts at Lehman Brothers say.
Lehman Brothers estimates Australia's big four banks have lent $A6.5 billion ($NZ7.57 billion) to companies struggling to repay debt including Allco Finance Group, ABC Learning Centres, MFS Ltd and Centro Properties Group. That compares to the $A2.27 billion of provisions for bad debt the four banks booked during 2007.
The banks - Commonwealth Bank of Australia, Australia & New Zealand Banking Group, Westpac and National Australia Bank - between them own New Zealand's ASB, ANZ, National Bank, Westpac and the Bank of New Zealand.
Lehman argues the exposure will affect profitability and hastens the need for the banks to raise more capital. The investment bank's analysts say they are not suggesting the banks will ultimately face losses equal to their exposure.
"Rather, we highlight the magnitude of risk in context to the level of provisions taken in 2007 and the need for these to rise," Lehman says. "The bigger question is whether these problem corporates are the tip of the iceberg or an anomaly reflecting market conditions."
Lehman adds that deteriorating asset quality is a key theme for Australian banks and a concern given the lack of transparency about exposure.
ASB parent Commonwealth Bank has lent the most to the troubled firms, Lehman says, at $A2.4 billion. ANZ is next with $A1.85 billion, National Australia Bank third with $A1.4 billion and Westpac last with $A845 million.
Skype rolling out for PlayStation Portable in Japan
March 4, 2008
TOKYO (AP) -- Sony's handheld video game machine, the PlayStation Portable, will connect to Skype, the popular, free voice-over-Internet service, later this month in Japan after a two-month delay, the company said Tuesday.
Skype has been available for the PSP in the U.S. and Europe since January, allowing people to use the Net-linking portable game machine as a phone.
But it wasn't available in Japan yet because the microphone Sony Computer Entertainment Japan had planned didn't meet specifications from Skype, a division of eBay Inc., a U.S. online auction company.
Special microphones for PSP's Skype feature will go on sale in Japan on March 19 at 2,500 yen (US$24) each and 4,000 yen (US$39) for two, and software will be upgraded a day earlier.
Headsets already on sale in overseas are being used for Skype since January, according to the video game unit of the Japanese electronics and entertainment company.
Skype says 276 million people have registered to use Skype around the world.
Tokyo-based Sony Corp. has been looking to boost offerings beyond games for the PSP, which faces stiff competition from Japanese rival Nintendo Co.'s DS handheld video game machine.
Sony recently raised its global sales forecast for the PSP for the fiscal year ending March 31, to 13 million machines from an earlier 10 million.
Nintendo, based in Kyoto, Japan, is expecting to sell 29.5 million DS machines during the same period.
Sony's PlayStation 3 home console is also struggling against the hit Nintendo Wii.
But PlayStation 3 sales are expected to pick up since the victory of the Blu-ray disc format in next-generation video that came when Toshiba said it would stop making the competing HD DVD products. The PlayStation 3 also works as a Blu-ray player.
Nikkei index ends flat with weakness in real estate and banking
March 4, 2008
TOKYO (AP) -- Japan's benchmark stock index ended flat Tuesday amid weakness in the real estate and banking sectors.
The Nikkei 225 index rose a meager 0.10 point at 12,992.28 after tumbling 4.5 percent Monday. The broader Topix index fell 5.49 points, or 0.43 percent, to 1,265.66.
Traders say the Tokyo market will likely lack direction until Friday when the U.S. jobs data for February are released. The data may give cues to investors looking to see whether the world's biggest economy has entered a recession.
"If (the data) are worse than expected, the Nikkei may fall toward 12,500 as drops in U.S. stocks will probably cause damage," said Masatoshi Sato, senior strategist at Mizuho Investors Securities. "And if that causes the dollar to further fall against the yen on worries over the U.S. economy, the Nikkei will probably test new year-lows."
Real estate and housing shares weighed on the the market after Sekisui House reported poor earnings Monday. Shares in the home builder dropped 4.9 percent to 980 yen. Sumitomo Realty & Development sank 4.9 percent to 1,660 yen.
Japanese bank shares ended lower on weakness in U.S. banking shares overnight. Sumitomo Mitsui Financial Group fell 3 percent to 717,000 yen.
Pioneer jumped 12 percent to 1,165 yen on hopes for stronger profit margins after media reports that the company is to stop making panels for plasma TVs.
In currencies, the dollar was trading at 103.38 yen midafternoon in Tokyo, up from 103.18 yen late Monday in New York. The euro fell to US$1.5188 from US$1.5192.
Prices of many commodities continue to rise furiously.
Besides this being a monetary phenomenon, fuelled by aggressive Fed accommodation, real growth in the global economy is also boosting commodities.
Fast industrialising emerging countries are fuelling global oil and protein demand, and creating demand for biofuels as oil substitute.
Either phenomenon is encouraging commodity binging.
But here is the catch.
Emerging countries playing developmental catch-up are overwhelming global commodity pipelines. And monetary boosting is fuelling speculative commodity investing, further bolstering commodity demand.
Commodity supply can be responsive to rising demand, even recklessly so, as past commodity expansion cycles show.
But global metal and mineral resources are today fully stretched and mostly controlled by people who have one thing in common: preventing oversupply, smoothing the cycle, preferably maximising resource value over time.
Global agriculture is limited by supply rigidities. It is difficult to expand food output by pressing more land into production or gain rapidly from technology.
The unrestrained eagerness of half the world population to achieve rapid economic growth is causing structural changes in relative commodity prices. Commodity prices are now rising much faster than finished product prices, the very opposite of what prevailed for decades.
This has been creating commodity price ‘shocks' around the world, as global consumers have become subjected to rising commodity price premiums, rewarding producers for growing scarcity.
But the manner in which these events are being analysed keeps harking back to olden days, in which growth could easily be upset by higher prices and loss of consumer purchasing power, as well as creating substitution and conservation effects, eroding commodity demand just as supply was getting its act in gear, ere long creating surpluses instead of shortages, causing commodity prices to plummet anew.
When commodity-led price shocks came into view again this decade, the "shock" analysis from yesteryear continued to prevail. The rise in commodity prices was considered of a passing nature, one or two seasons at most. It might temporarily upset inflation, but it would pass.
But that view was appropriate in distant times when growth was slower and commodity demand seemingly more price-sensitive. In today's global climate growth seems more persistent, commodity demand less price-sensitive and supply less responsive.
The price mechanism still functions, offering reduced demand through substitution and conservation and increased supply in response to higher prices, yet commodity demand and supply have so far failed to match and prices have failed to stabilise.
What has come into view are not temporary price "shocks", but a process in which many commodity prices are steadily being elevated to higher levels. It reflects as much excess monetary accommodation in slowing economies as the global developmental scramble and its accompanying shortages of everything, including apparently cheap Chinese industrial labour (Greenspan's view).
That suggests global inflation being given a new impetus from relative price changes, which this time is not suppressing inflation (unlike decades past).
Instead, global inflation is being pushed on to a higher trajectory, more so in poorer countries with higher relative energy, food and other commodity needs, compared to richer, mature countries already more diversified beyond commodity-intensive needs.
The question facing all central banks: How to respond to this fallout from neighbourly binging? The global monetary boosting may be temporary, but developmental catch-up is a long-term phenomenon.
We can't undo the higher imported inflation, unless being favoured by an appreciating currency, neutralising the higher commodity prices. Or opt for a period of domestic underperformance.
So are we expected to maintain our real interest rates, and raise nominal interest rates in line with the rising inflation brought on by other people's commodity (and monetary) binging?
What will that accomplish?
If interest rates were held unchanged while inflation (and wages) rose, our real cost of credit would decline, inviting renewed spending binging of our own. That won't do when effectively at full production.
But if nominal rates are hiked further, keeping real rates unchanged, highly indebted households could find their cash flows pinched if they have aggressively leveraged debt.
That is not half as bad as it sounds, as improving export prices are bolstering our producers and farmers.
Still, having just enjoyed a long-running vigorous household boom in which indebtedness was greatly increased, getting caught by someone else's binging, higher inflation and consequent interest rate increases can be inconvenient. These past 18 months our households have already greatly moderated spending and credit growth.
What to do? The higher inflation is mostly injected by others, our own high indebtedness would make further interest rate hikes a costly affair incurring unnecessary growth sacrifice, but mining and farming are enjoying real income gains.
Will we for a while simply watch CPIX soar higher, fuelled by other people's food, oil and monetary binging? Our own growth is already taking a beating from our adjustment to earlier interest rate increases, and we wouldn't want to pulp spending growth even further?
There may be scope to stand aside, but not indefinitely. Either the world stops binging or we would eventually have to neutralise its inflation fallout.
HSBC France's 'Aa2/B-' ratings on review for possible downgrade - Moody's
March 03, 2008
Moody's Investors Service said it placed HSBC France's 'B-' bank financial strength rating (BFSR), 'Aa2' long-term debt and deposits ratings and 'Aa3' subordinated debt rating under review for possible downgrade.
The move follows the announcement that HSBC France is entering into exclusive negotiations with Groupe Banque Populaire (GBP) for the sale of seven regional banks of the HSBC France group.
Moody's said the sale of the seven regional banks, if finalised, could have a material negative impact on HSBC France's franchise.
The short-term debt and deposits rating is affirmed at 'Prime-1', the rating agency added.
LONDON (Reuters) - Fund firm Schroders reported higher-than-expected 2007 profits on Tuesday, lifting its shares, although it also said it expects a tougher business environment this year due to continued market volatility.
Pre-tax profit rose 35 percent to 392.5 million pounds, from 290 million pounds in 2006, helped by sales of higher-margin products.
Assets under management rose to 139.1 billion pounds at end-December from 128.5 billion pounds a year earlier, boosted by strong retail net inflows in Asia Pacific and the UK.
Schroders increased its final dividend to 21 pence per share from 17.5 pence, bringing the total dividend for 2007 to 30 pence.
At 9:40 a.m. Schroders shares, which have underperformed the FTSE 100 index by 24 percent over the past three months, were 3.8 percent higher at 961.5 pence.
However, the firm said market volatility that began with last summer's U.S. subprime meltdown was likely to persist this year, affecting its business.
"We expect ... volatile market conditions to persist through much of 2008 and as a result we envisage a less favourable environment for our business," the firm said in a statement.
A number of fund firms have warned of tougher conditions as investors become more cautious and withdraw assets. A record net 550 million pounds was withdrawn from British-registered retail funds in January, according to the Investment Management Association.
"This is not going to be over in the very short term ... Obviously it's having an effect on (industry) flows and we can't buck that trend, although relatively we won't be badly positioned," Chief Executive Michael Dobson said on a conference call to journalists.
He declined to comment on whether or not he expected net outflows for the business during 2008.
In October, the firm posted a higher-than-expected rise in third-quarter profit but said the market environment would become more challenging.
Last year Schroders, which traces its roots back more than 200 years, said it was very open-minded about selective small acquisitions but ruled out any transformational deal.
"Valuations have come way down and that's likely to produce opportunities in our view," Dobson said on Tuesday.
Landsbanki analyst Samir Shah said in a note that Schroders trades on a 2008 price/earnings (p/e) ratio of 9.4 times, a 21 percent discount to the sector.
"While the p/e multiple is lower than historical levels, general market sentiment towards traditional asset managers together with management's cautious outlook does not support a re-rating in the near term and we retain our hold recommendation," he said.
Thornburg Drops as Citigroup Sees Possible Bankruptcy
By David Mildenberg
March 3 (Bloomberg) -- Thornburg Mortgage Inc. lost more than half its market value after the home lender failed to meet $270 million of margin calls and a Citigroup Inc. analyst said bankruptcy is possible.
Thornburg fell $4.98, or 56 percent, to $3.92 at 12 p.m. in New York Stock Exchange composite trading. The Santa Fe, New Mexico-based company, which has struggled with falling prices for mortgages since the middle of 2007, may try to raise money by selling debt, equity or securities holdings, according to a statement today.
``Another downturn in the market could lead to significant risk to the company; a more dire turn in the market could lead to bankruptcy,'' Citigroup analyst Donald Fandetti wrote in a note to investors today. Fandetti cut his rating on the stock today to ``sell'' from ``hold'' and slashed his 12-month price target to $5 from $12.
Thornburg, a specialist in ``jumbo'' loans often used to buy more expensive homes, began running short on cash last August, even though the company didn't make subprime loans to people with the weakest credit. The stock's plunge today set a record low and ranked as Thornburg's biggest one-day loss since June 1993, leaving the shares down 84 percent in 12 months.
The company had been predicting a comeback from a $1.1 billion third-quarter loss last year that forced it to suspend lending and the quarterly dividend. Both were later resumed and Thornburg earned $64.8 million in the fourth quarter. Fandetti wrote today that the payout is likely to be cut off again.
Raising Money
The company isn't sure new cash or capital can be raised at acceptable prices, adding that failure may hurt Thornburg's ``ability to continue its business in the current manner.''
Thornburg spokeswoman Suzanne O'Leary Lopez said she hasn't seen Fandetti's report and declined to comment.
The lender expects to be profitable throughout this year, Chief Executive Officer Larry Goldstone said in a Feb. 28 interview. Thornburg said today it previously met more than $300 million of margin calls as of Feb. 27.
The company offers adjustable-rate loans too big to be sold to government-chartered Fannie Mae and Freddie Mac. Thornburg also invested in bonds backed by so-called Alt-A mortgage loans typically made to homeowners with credit scores that are above subprime and below prime.
Securities Trader And Former UBS Executives Plead Guilty To Massive Insider Trading Schemes
February 28, 2008
MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that MITCHEL GUTTENBERG, a former executive director in the equity research department of UBS Securities LLC (“UBS”), and DAVID TAVDY pleaded guilty today to participating in a massive insider trading scheme that netted millions of dollars in illegal profits. GUTTENBERG, 42, and TAVDY, 39, pleaded guilty in Manhattan federal court before United States District Judge DEBORAH A. BATTS. According to the Indictment and the guilty plea proceedings:
Between December 2001 and August 2006, GUTTENBERG repeatedly sold to TAVDY and another individual material, nonpublic information regarding upcoming upgrades and downgrades in UBS analysts’ securities recommendations (the "UBS Inside Information"). Investors, including institutional investors and professional money managers, regularly relied on UBS analysts’ ratings of public companies’ securities. As a result, changes in UBS analysts’ recommendations regarding a particular company’s securities were material to investors and often had a direct effect on the trading price of that company’s stock. Before UBS publicly releases its analysts’ upgrades and downgrades, they must be reviewed by the UBS Investment Review Committee ("IRC"). GUTTENBERG became a member of the IRC in December 2001, and, accordingly, was entrusted with the UBS Inside Information.
In breach of his duties of trust and confidence to UBS, and in violation of UBS's written policies, GUTTENBERG sold the UBS Inside Information to TAVDY and another individual, who each paid him hundreds of thousands of dollars. TAVDY and the other individual separately used the UBS Inside Information to execute hundreds of profitable securities transactions. By using the UBS Inside Information, TAVDY and the other individual earned some $15 million in illegal profits for themselves and for a series of hedge funds with which the other individual was associated. GUTTENBERG’s tips to TAVDY alone resulted in net profits of more than $10 million in brokerage accounts under TAVDY’s control and the brokerage account of Jasper Capital, an entity though which TAVDY traded.
When GUTTENBERG communicated that UBS was about to announce an upgrade in its recommendation for a company’s stock, the recipient of the UBS Inside Information would purchase the stock. After UBS publicly announced its upgrade, the price of the stock generally would increase. The recipient then would sell the stock to earn a profit. Similarly, when GUTTENBERG communicated that UBS was about to announce a downgrade in its recommendation for a company’s stock, the recipient of the UBS inside information would sell the stock short. After UBS publicly announced its downgrade, the price of the stock generally would fall, after which the recipient would purchase the stock that he had sold short to earn a profit.
For example, on March 28, 2006, GUTTENBERG communicated to TAVDY that UBS was going to downgrade its rating on the stock of Caterpillar, Inc. That day, TAVDY sold short approximately 11,000 shares of Caterpillar stock in one of his brokerage accounts. The next day, March 29, 2006, UBS publicly announced that it was downgrading its rating on Caterpillar from "buy" to "neutral." Following the UBS announcement, on the same day, TAVDY covered his short position by purchasing approximately 11,000 shares of Caterpillar stock in the same brokerage account, resulting in a profit of at least $30,000.
Similarly, on May 25, 2006, GUTTENBERG communicated to TAVDY that UBS was going to upgrade its rating on the stock of Goldman Sachs Group, Inc. That day, TAVDY bought approximately 7300 shares of Goldman Sachs stock in one of his brokerage accounts. The following day, May 26, 2006, UBS publicly announced that it was upgrading its rating on Goldman Sachs from "neutral" to "buy." Following the UBS announcement, on the same day, TAVDY sold approximately 7300 shares of Goldman Sachs stock from the same brokerage account, resulting in a profit of at least approximately $20,000.
GUTTENBERG pleaded guilty to two counts of conspiracy to commit securities fraud and four counts of securities fraud. He faces a maximum sentence of 90 years’ imprisonment.
GUTTENBERG is scheduled to be sentenced on June 2, 2008 at 11:30 a.m. GUTTENBERG remains free on bail pending sentencing. TAVDY pleaded guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. TAVDY faces a maximum sentence of 45 years’ imprisonment. TAVDY is scheduled to be sentenced on June 30, 2008 at 11:30 a.m. TAVDY remains free on bail pending sentencing.
Mr. GARCIA, a member of the President’s Corporate Fraud Task Force, praised the efforts of the FBI and thanked the SEC for its assistance in the investigation.
Assistant United States Attorneys ANDREW L. FISH and JOSHUA A. GOLDBERG are in charge of the prosecution.
17 comments:
KUALA LUMPUR, March 4 (Reuters) - Malaysian crude palm oil futures dived 5.8 percent on Tuesday after an earlier record high as investors pocketed profits on fears of a possible Beijing move to cap vegetable oil prices, traders said.
The benchmark May contract on the Bursa Malaysia Derivatives Exchange fell as much as 250 ringgit to 4,080 Malaysian ringgit ($1,277) per tonne, after surging 3.6 percent to an all-time high of 4,486 ringgit.
“The trigger for this wave of profit taking comes from Dalian soyoil,” said a Malaysian palm oil trader with a foreign commodities broker.
“Big gains in soyoil have been made and investors want to get some cash in the pockets before the next price rally starts all over again,” he added.
Chicago soyoil futures fell from record highs in Asian trade on Tuesday after Dalian soyoil futures suffered large losses after days of rallying by their daily limits.
Traders in China said the domestic market was worried that Beijing would introduce new measures due to fears of inflation after jumps in physical vegetable oil prices to record highs.
But analysts said profit taking was temporary and the hedge funds were still in the market to make gains on palm oil, which is still up 33 percent so far this year.
“The activities in the Malaysian palm oil futures market have been dominated by hedge funds but the fundamentals of growing demand and tightness in global vegetable oil supplies are rock solid,” said Fordyanto Widjaja, an analyst with Morgan Stanley.
On Monday, crude oil hit another record high at $103.95 on expectations that OPEC will rebuff calls for more output this week and after the dollar briefly touched new lows against other major currencies.
And U.S. soybean and soyoil futures soared to all-time highs on Monday as a result of Chinese demand for vegoils and broad-based buying of commodities by speculators.
Global vegetable oil prices often track energy markets as rapeseed and soybean oils are converted into biodiesel in Europe and America. This puts more pressure on palm oil to satisfy food demand as shipments to Europe and other regions rise. ($1=3.196 Ringgit)
Stop letting warrants distort picture
By R SIVANITHY
March 4, 2008
EVERY day, stock market players either log on to the Singapore Exchange's website or Teletext to check the state of the market. Apart from looking at indices and individual prices, most would also glance at the number of rises and falls, or to give it its popular term, the advance-decline score, since this gives an idea of the strength or weakness in the broad market.
Unfortunately, the figures convey the wrong picture. Why? Hundreds of warrants are included, which causes a distortion that should be corrected.
Last Friday, for example, the SGX website and Teletext showed 273 rises, 414 falls and 1,124 items unchanged. The first misrepresentation was that there are a total of 1,811 listed entities on SGX when the correct figure, stripping out warrants, is only around 800.
The second was that the ratio of advances to declines was 0.65 (273/414) when the correct figure, minus warrants, was 0.76 (182/240).
In other words, as far as Friday's session was concerned, the inclusion of warrants in the market's statistics gave the impression that the broad market was weaker than it really was - perhaps surprising, given that the Straits Times Index dropped 48 points to 3,026 that day.
Similarly, yesterday's gainers/losers figures on SGX's homepage were 152-577 for a ratio of 0.26 when the correct numbers, excluding warrants, were 64-391, for a ratio of 0.16. Again, the wrong impression - the market seemed stronger than it really was.
To see how the figures are distorted, consider, for example, that there are about 50 warrants in issue on CapitaLand shares, of which around 35 are calls that gain when the shares rise, and 15 puts that gain when the shares fall.
Assuming warrant prices behave in the manner expected of them, that is, market makers do a proper job in setting prices, then when CapitaLand shares rise, the 'advances' figure increases by 36 items while the 'declines' figure drops by 15.
Conversely, a drop in CapitaLand shares means 15 rises and 36 falls are wrongly added to the advance-decline score.
Factor in the fact that stocks such as SingTel and Cosco and indices such as the Hang Seng and STI have as many warrants on them as CapitaLand, and the full extent of the distortion can be appreciated. Not only is the picture distorted, traders and technical analysts are unable to map out trends in the broad market across time because warrant numbers are constantly changing - every few days, major warrant issuers like Macquarie, Deutsche and SG issue new instruments while simultaneously, there may be other warrants expiring.
If the total number of warrants changes from day to day, and if their inclusion distorts the picture significantly, then surely in the interests of accuracy, it's best to disclose the performance of warrants separately?
To be fair, warrant figures are disclosed in the summary pages under the heading 'Loans and debentures' - interestingly, warrants are neither loans nor debentures and viewers would have to do subtraction to arrive at the correct figures. For the sake of accuracy and convenience, warrant figures should therefore be removed from homepages right from the start.
While we're on the topic of removing warrant data, is there any point in including warrants in the top percentage gainer and losers lists that appear on Teletext every day?
In yesterday's session, for example, 19 out of the top 20 percentage gainers were index warrants on the Straits Times, Hang Seng, Nikkei and KL indices (mainly puts, of course, given the sharp plunge).
The range of gains was 25-200 per cent, a seemingly impressive showing but ultimately useless from an informational content point of view, particularly since the majority of investors do not trade warrants - warrant volume in dollars yesterday made up only 4.6 per cent of the total.
Had warrants been excluded and the lists focused solely on stocks, investors would have seen that United Engineers was among the day's top percentage gainers with a rise of about 4 per cent, or that WBL gained almost 9 per cent. In a day when the STI lost almost 100 points or 3.3 per cent, surely this is more useful to investors.
As with all forms of disclosure, the ultimate aim has to be to convey as accurate a picture of the market's performance as possible. This cannot be the case if movements in almost 1,000 warrants are included in the daily statistics. It's therefore best to report the performance of the warrant segment separately and not allow it to distort the picture as is the case now.
S'pore Reits, feeling credit squeeze, may merge
Mar 04, 2008
SINGAPORE'S once booming real estate investment trusts (Reits) may face a round of mergers to weed out the weak who find it increasingly tough to raise funds and refinance loans because of the global credit crisis.
At least six of Singapore's 20 listed Reits are valued below what their properties are worth, as are many trusts in Japan and Australia, which means expansion is hampered by higher financing costs and investor returns are limited.
Some of the trusts will face higher interest payments when they need to refinance their debt in coming months, leading to lower earnings and distribution to unitholders.
'I would expect consolidation to gather pace in the course of the next 6 to 12 months,' said Mr Tony Darwell, head of Asian equity research at Nomura. 'The cost of debt has risen and it is impacting everyone, especially entities that are highly geared.'
For investors, many of whom are already steering clear of property and other assets that rely on debt financing, the takeover speculation means some Reits such as Macquarie MEAG Prime may get bid up to prices closer to book value.
But others such as Mapletree Logistics Trust could see their shares fall further, due to large amounts of debt on their books.
'Singapore's Reit market is still very young and shouldn't have reached the stage for consolidation, but the situation now is quite conducive (to that),' said Credit Suisse analyst Tricia Song.
Singapore's market for property trusts, Asia's third largest, has grown rapidly since 2002 when the first Reit, CapitaMall Trust , went to market. The industry has since grown to 20 Reits worth US$19 billion (S$26 billion), although that number may shrink as at least two players are up for sale.
Acquisition targets include Reits trading at high yields, at large discounts to book value, or with quality assets that bigger funds could be interested in, Mr Song said.
Industry experts say the first Singapore Reits that may be taken over will be those that have ties to firms or property funds in Australia, Asia's biggest property trust market.
Macquarie MEAG Prime REIT , which owns two large properties on Singapore's Orchard Road shopping belt, said it may sell assets or go private after main shareholder Macquarie received unsolicited offers for its 26 per cent stake.
Allco Commercial Reit, which owns office properties in Singapore and Australia, is being closely watched as its Australian parent, Allco Finance , is trying to sell assets to meet debt repayment deadlines.
'The yield is so high at 9 percent; Allco Reit can't raise capital and their debt is due soon. They need to do something soon,' said a hedge fund manager, who asked not to be identified.
Downgrades
Allco in November dropped plans for a $150 million share sale due to weak markets. In January, Moody's cut its credit rating to Ba1, or junk, from a Baa3 investment grade rating, citing potential problems in refinancing $550 million in short-term debt due in July.
Other Reits downgraded or placed on review for downgrade this year include MMP, Mapletree Logistics Trust and Suntec Reit, on concerns of refinancing risks.
Suntec Reit last week closed a 5-year convertible bond issue worth $250 million at a 4.25 per cent yield to maturity, much higher than its average financing cost of 3.13 per cent as of end-December.
'Credit spreads have widened significantly over the past month. We believe this is likely to place pressure on both the cost and availability of future debt,' Merrill Lynch analyst Melinda Baxter said in a note to clients last week.
Aside from Macquarie and Allco, other Singapore Reits that could be privatised or sold include Cambridge Industrial Trust and MacArthurCook Industrial Reit, which lack a strong parent to block any takeover bid, analysts said.
'There are some independent Reits out there and there could be some M&A activity,' said Mr Mark Ebbinghaus, head of Asian real estate investment banking at UBS. 'I wouldn't say that there is going to be wholesale M&A in the sector.'
Despite the difficulty in raising equity and the need to refinance debt, acquisition talks have helped lift Reit share prices. MMP's share price has rebounded 30 per cent from record lows in January, while Allco is up 26 per cent.
But finding the right buyer could take time.
Tycoon Kwek Leng Beng, who runs Singapore's second-biggest property firm City Developments, declined to confirm talks with Allco or MMP, but said he would only consider buying if the sale includes the Reit manager, which he sees as more profitable.
'We'll be happy to look at it. But if you sell me a Reit without the management company, I say goodbye to you, I'm not interested,' said Mr Kwek, Singapore's fifth-richest man.
Consolidation would leave a sector with fewer, but larger Reits that have greater financial capacity to expand abroad.
This development would follow Australia, whose Reit market expanded from 20 listed trusts in 1994 to 51 in 1999, and has since shrunk to 34 trusts that have three times more assets.
'Singapore is not going to take 40 years to get to where Australia is. The Reit market will mature at a much faster rate, although there is still a lot more scope to grow in total size,' said Nomura's Darwell. -- REUTERS
ICICI Bank Loses $264 Million on Overseas Investments
By M.C. Govardhana Rangan and Kartik Goyal
March 4 (Bloomberg) -- ICICI Bank Ltd., India's second- largest bank, reported $264 million of costs to write down the value of overseas investments, the biggest loss disclosed by an Indian bank since the collapse of the U.S. subprime market.
ICICI set aside $90 million through December and $70 million will be earmarked in fourth-quarter earnings, said Chanda Kochhar, ICICI joint managing director, in a telephone interview. The rest will be set off against the bank's net worth.
The Mumbai-based bank slumped as much as 9.3 percent on the Bombay Stock Exchange after Junior Finance Minister Pawan Kumar Bansal disclosed the loss in parliament today. Shares closed 5.2 percent lower at 971.60 rupees.
``The quantum of the loss comes as a surprise and has unnerved the market and traders,'' said Rajesh Jain, chief executive officer at Pranav Securities Ltd. ``Investors know from experience that such signs are always the tip of the iceberg.''
ICICI joins banks from Wall Street to Japan to Europe that have taken losses on subprime mortgages. So far, 45 of the world's biggest banks and securities firms have written down or lost $181 billion related to investments tied to rising defaults on U.S. home loans to people with poor credit histories.
The company has the largest holdings of overseas investments among the nation's major banks and has been expanding internationally to counter slowing demand for credit in India. The value of the subprime-related investments in its $2 billion of overseas assets dropped because investors are shunning all except for the safest securities, Kochhar said.
Profit Increase
Bansal said there's no sign of large-scale credit losses among Indian banks.
``Following the subprime crisis overseas, ICICI Bank's overseas operations had reported marked-to-market losses of $264.34 million on account of its exposure to credit derivatives and investments as on'' Jan. 31, 2008, Bansal said in reply to a question in parliament in New Delhi.
ICICI Bank's profit rose 35 percent to 12.3 billion rupees ($305 million) in the quarter ended Dec. 31, the bank said in January, beating analyst estimates.
``If it's limited to marked-to-market and not credit losses, it should not affect the operations significantly,'' said Sandip Sabharwal, chief investment officer at J.M. Mutual Fund, which manages about $3 billion in assets.
State Bank of India, the nation's largest by assets, lost 2.6 percent to 1,873.95 rupees. HDFC Bank Ltd. slid 2.4 percent to 1,357.30.
Bank's Owners
Singapore government investment funds are the single largest holders in ICICI Bank, with about a 9 percent stake. Temasek Holdings Pte, through Allamanda Investments Pvt, owns 7.6 percent, and the Government of Singapore Investment Corp. 1.4 percent, according to the latest regulatory filings.
``So far, no specific instance of significant losses suffered by large financial institutions in India, especially from subprime mortgages in the U.S., has been noticed,'' Bansal said.
Templeton files complaint on S'pore AsiaPharm deal
Mar 04, 2008
Templeton Asset Management, which is opposing the takeover of Chinese drug company AsiaPharm by MBK Partners, has complained to Singapore's corporate regulator alleging the proposed S$357 million ($256.8 million) deal was unfair to minority shareholders.
"We don't think full and fair disclosure has been made for all agreements that are required by the law," Mark Mobius, the firm's top fund manager for emerging markets, told Reuters on Tuesday.
He said the fund manager has complained to the Securities Industry Council , alleging that information vital for minority shareholders to make a prudent decision has been withheld.
The complaint was filed against LuYe Pharmaceutical, a unit of MBK Partners, an Asia-focused private equity firm, and AsiaPharm director Liu Dianbo, Templeton said.
"They must explain... why are they buying these shares, why are they going into this venture with MBK and why are they offering this price, which we consider a very low price," Mobius said.
The SIC said it would not discuss dealings with individual parties in a takeover offer, while a public relations firm representing LuYe also declined comment. Attempts to reach AsiaPharm director Liu were unsuccessful.
Templeton, which owns about four percent of AsiaPharm's stock, said in a statement on Monday that LuYe's offer price of S$0.725 a share "substantially undervalues" the Chinese firm's shares.
The investment firm had bought the shares for S$0.8032 in May 2006, according to previous press releases.
In the interview with Reuters, Mobius alleged agreements were made between MBK and AsiaPharm directors, including Liu. Details of these pacts had to be disclosed so that minority shareholders could make a an informed decision, he said. -- REUTERS
Singapore gov't butt of jokes after prison escape
March 4, 2008
SINGAPORE (AFP) — Terrorism is usually no laughing matter, especially not in security-conscious Singapore, but the escape from custody of a limping Islamist extremist suspect has led to scorn on the Internet.
Barbed jokes and irreverent spoofs have sprouted up on websites five days after Mas Selamat bin Kastari, the alleged Singapore chief of regional terror group Jemaah Islamiyah, escaped with apparent ease from a detention centre.
"Toilet Break, based on a true story starring Mas Selamat Kastari," read a mock post on one wesbite by a blogger inspired by the hit US television drama "Prison Break".
Blogger Philip Chua wrote: "Singapore has now dropped the ball big time and really is an international laughing stock."
"You don't see prisoners escaping from terrorist detention centres in the West or Guantanamo. More so a leader of the terrorist network in the country next to you!"
Kastari, who was arrested in neighbouring Indonesia in 2006 and turned over to Singapore, remained at large Monday and officials said he was likely to be still hiding in this multiracial island republic of 4.7 million people.
Accused of plotting to hijack a plane in order to crash it into Singapore's Changi airport in 2001, Kastari managed to escape after asking to go to the toilet during a family visit, security officials said.
Direct criticism of the government is rare in the mainstream media, forcing dissatisfied Singaporeans to resort to the Internet to express their views.
Teoh Khengze, a Singapore-based author and journalist, wrote on his blog that the circumstances of what he called "The Great Singapore Escape" were "as incredulous as the escape is audacious."
Talkingcock.com, a popular satirical site, said Kastari's escape underlined the need to give cabinet ministers another salary hike even though they were already among the highest-paid in the world.
"We need to equip our Mini-stars with everything they can to deal with this crisis... and as we know in Singapore, public service and legislative influence are all not sufficient incentives," it said.
"Only the highest salaries in the world will do," the humour site said.
It showed 13 doctored photographs of Kastari in various possible disguises -- in a blonde woman's wig, a 1960s-style Afro hairdo and aviator sunglasses, a handlebar moustache and a beard and turban in Osama bin Laden style.
A popular Singaporean blogger who has previously irked the government with attacks on high living costs said the city-state need not worry about losing cabinet ministers.
"They won't be asked to resign or even take a pay cut," wrote the blogger known as Mr. Brown.
"We are not like those free-wheeling and chaotic governments from Western democracies that make their leaders accountable for every little thing."
Commodities boom intact, says Jim Rogers
Shortages of goods from oil to zinc and lead are looming
By ANTHONY ROWLEY
March 4, 2008
NOT even the prospect of a simultaneous slowdown or recession in the world's first and second largest economies, the US and Japan respectively, and of looming problems in China can dent the enthusiasm of guru Jim Rogers for investment in what he calls the as yet 'untouched asset class' of commodities.
A Singapore resident nowadays, Mr Rogers sees his passion for commodities as an adventure as much as an investment.
He has driven half way around the globe by car and through Africa on a motorbike to see for himself how the world really works, and in the process come to the conclusion that, in the end, only natural resources have lasting - and appreciating - value.
It has led him to some stark conclusions, including a belief that agricultural commodities will 'explode' as food wars threaten and that shortages of everything from oil to zinc and lead are looming.
Speaking (performing is perhaps a better word given his entertaining and flamboyant presentation) in Tokyo last week, the septuagenarian Mr Rogers acknowledged that the prospect of recession in at least some major industrialised countries could dent demand for commodities somewhat.
But he claimed that the price of base metals has already discounted the possibility of recession and that the 'secular' bull market in commodities remains intact.
He attracts attention and very large audiences by virtue of the fact that he has personally made a lot of money out of commodities, by knowing when to buy and when to sell. Several hundred fund managers from around the region hung on his every word at last week's event, wanting his views not only on commodities but on everything from the yen to Russian stocks
On the former he did not hesitate. The yen can only 'go through the roof' once the carry trades (selling yen for finance investment in other currencies) come to an end, which they surely will before long, he suggested.
But as for Russian stocks Mr Rogers confessed himself ill at ease with what he called Russia's 'outlaw capitalism', despite the fact that his globe-trotting has taken him through some pretty wild and woolly regions of the world.
China is a different story, insisted the Sinophile American who moved from New York to Singapore to be in a Chinese environment where the eldest of his two very young daughters is already fluent in mandarin thanks to her Chinese governess.
Any setback in China, such as the fact that its speculative bubble in real estate 'will go bust either this year or next' should be seen as a buying opportunity, he said.
'When there are problems in China, don't think that's the end of the story.' Unlike other powers that have emerged throughout history - the Roman or British empires, for example - China has 'had recurring periods of greatness', he noted. The current one will not be stopped or slowed for long by setbacks in other parts of the global economy, and that in turn will continue to underpin a commodities boom that should last until 2020, he suggested.
He was not quite so flattering about his native America - or about the dollar. America is 'out of control', insisted Mr Rogers adding to its existing US$13 trillion of foreign debt at the rate of US$1 trillion every 15 months' and printing money as though there were no tomorrow, he said. 'This is a terrible policy,' he added, accusing Federal Reserve governor Ben Bernanke of 'knowing nothing about economics, currencies or business'. As a result, the dollar is in decline 'and you've not seen anything yet', he said.
Iran and Venezuela are not the only oil producers who want out from the dollar, said Mr Rogers. But in whatever currency oil is priced, it can only go up from here onward, he suggested. Investment in oil production, as in other basic commodities and raw materials, lags far behind demand and meanwhile global oil reserves are declining, said Mr Rogers.
Not only energy investments are wise but also a punt on natural fibres and yarns should pay off in the future as the prices of synthetics rise in sympathy with oil.
A falling dollar will feed into rising commodity prices, as will current inflationary trends, and that certainly includes the price of gold, Mr Rogers suggested. But agricultural commodities and foodstuffs will be the new gold of the future.
Demographic, climatic and environmental changes will be enormous upward pressures of global food prices, and trigger conflicts in some regions. Any kind of food investment now should pay rich dividends in the future.
The bull market in equities is over and bonds are likely to be in a bear market for years, with inflation running ahead of yields, he insisted. This is the dawning of the age of commodities, the guru added.
Gulf investors not enough to rescue Citigroup: Dubai
Tue Mar 4, 2008 7:58am EST
DUBAI (Reuters) - Gulf investment agency Dubai International Capital (DIC) said on Tuesday it would take "a lot more money" to rescue Citigroup Inc following investments from Abu Dhabi, Kuwait and Saudi Arabia's Prince Alwaleed.
Sameer al-Ansari, chief executive officer of the investment agency owned by the ruler of Dubai, was asked by Reuters what it would take to rescue the bank.
Dubai International Capital, which manages about $13 billion of assets, has invested in HSBC Holdings Plc and India's ICICI Bank
"It's going to take more than that to rescue Citi," he had earlier told a private equity financial conference.
The Abu Dhabi Investment Authority, a sovereign wealth fund owned by the world's fifth-largest oil exporter, last year bought a 4.9 percent stake in Citigroup, which has been hammered by write-downs linked to the U.S. subprime mortgage crisis.
The Kuwait Investment Authority said in January it would invest $3 billion in Citigroup.
Citigroup suffered a record $9.83 billion fourth-quarter loss tied mainly to mortgage write-downs.
Aussie banks bad debt seen rising
By GARETH VAUGHAN
04 March 2008
Australia's big four banks, which control the bulk of New Zealand's banking assets, might need to triple bad debt provisions due to their exposure to financially troubled firms, analysts at Lehman Brothers say.
Lehman Brothers estimates Australia's big four banks have lent $A6.5 billion ($NZ7.57 billion) to companies struggling to repay debt including Allco Finance Group, ABC Learning Centres, MFS Ltd and Centro Properties Group. That compares to the $A2.27 billion of provisions for bad debt the four banks booked during 2007.
The banks - Commonwealth Bank of Australia, Australia & New Zealand Banking Group, Westpac and National Australia Bank - between them own New Zealand's ASB, ANZ, National Bank, Westpac and the Bank of New Zealand.
Lehman argues the exposure will affect profitability and hastens the need for the banks to raise more capital. The investment bank's analysts say they are not suggesting the banks will ultimately face losses equal to their exposure.
"Rather, we highlight the magnitude of risk in context to the level of provisions taken in 2007 and the need for these to rise," Lehman says. "The bigger question is whether these problem corporates are the tip of the iceberg or an anomaly reflecting market conditions."
Lehman adds that deteriorating asset quality is a key theme for Australian banks and a concern given the lack of transparency about exposure.
ASB parent Commonwealth Bank has lent the most to the troubled firms, Lehman says, at $A2.4 billion. ANZ is next with $A1.85 billion, National Australia Bank third with $A1.4 billion and Westpac last with $A845 million.
Skype rolling out for PlayStation Portable in Japan
March 4, 2008
TOKYO (AP) -- Sony's handheld video game machine, the PlayStation Portable, will connect to Skype, the popular, free voice-over-Internet service, later this month in Japan after a two-month delay, the company said Tuesday.
Skype has been available for the PSP in the U.S. and Europe since January, allowing people to use the Net-linking portable game machine as a phone.
But it wasn't available in Japan yet because the microphone Sony Computer Entertainment Japan had planned didn't meet specifications from Skype, a division of eBay Inc., a U.S. online auction company.
Special microphones for PSP's Skype feature will go on sale in Japan on March 19 at 2,500 yen (US$24) each and 4,000 yen (US$39) for two, and software will be upgraded a day earlier.
Headsets already on sale in overseas are being used for Skype since January, according to the video game unit of the Japanese electronics and entertainment company.
Skype says 276 million people have registered to use Skype around the world.
Tokyo-based Sony Corp. has been looking to boost offerings beyond games for the PSP, which faces stiff competition from Japanese rival Nintendo Co.'s DS handheld video game machine.
Sony recently raised its global sales forecast for the PSP for the fiscal year ending March 31, to 13 million machines from an earlier 10 million.
Nintendo, based in Kyoto, Japan, is expecting to sell 29.5 million DS machines during the same period.
Sony's PlayStation 3 home console is also struggling against the hit Nintendo Wii.
But PlayStation 3 sales are expected to pick up since the victory of the Blu-ray disc format in next-generation video that came when Toshiba said it would stop making the competing HD DVD products. The PlayStation 3 also works as a Blu-ray player.
Nikkei index ends flat with weakness in real estate and banking
March 4, 2008
TOKYO (AP) -- Japan's benchmark stock index ended flat Tuesday amid weakness in the real estate and banking sectors.
The Nikkei 225 index rose a meager 0.10 point at 12,992.28 after tumbling 4.5 percent Monday. The broader Topix index fell 5.49 points, or 0.43 percent, to 1,265.66.
Traders say the Tokyo market will likely lack direction until Friday when the U.S. jobs data for February are released. The data may give cues to investors looking to see whether the world's biggest economy has entered a recession.
"If (the data) are worse than expected, the Nikkei may fall toward 12,500 as drops in U.S. stocks will probably cause damage," said Masatoshi Sato, senior strategist at Mizuho Investors Securities. "And if that causes the dollar to further fall against the yen on worries over the U.S. economy, the Nikkei will probably test new year-lows."
Real estate and housing shares weighed on the the market after Sekisui House reported poor earnings Monday. Shares in the home builder dropped 4.9 percent to 980 yen. Sumitomo Realty & Development sank 4.9 percent to 1,660 yen.
Japanese bank shares ended lower on weakness in U.S. banking shares overnight. Sumitomo Mitsui Financial Group fell 3 percent to 717,000 yen.
Pioneer jumped 12 percent to 1,165 yen on hopes for stronger profit margins after media reports that the company is to stop making panels for plasma TVs.
In currencies, the dollar was trading at 103.38 yen midafternoon in Tokyo, up from 103.18 yen late Monday in New York. The euro fell to US$1.5188 from US$1.5192.
What is going on with commodity prices?
Cees Bruggemans
04 March 2008
Prices of many commodities continue to rise furiously.
Besides this being a monetary phenomenon, fuelled by aggressive Fed accommodation, real growth in the global economy is also boosting commodities.
Fast industrialising emerging countries are fuelling global oil and protein demand, and creating demand for biofuels as oil substitute.
Either phenomenon is encouraging commodity binging.
But here is the catch.
Emerging countries playing developmental catch-up are overwhelming global commodity pipelines. And monetary boosting is fuelling speculative commodity investing, further bolstering commodity demand.
Commodity supply can be responsive to rising demand, even recklessly so, as past commodity expansion cycles show.
But global metal and mineral resources are today fully stretched and mostly controlled by people who have one thing in common: preventing oversupply, smoothing the cycle, preferably maximising resource value over time.
Global agriculture is limited by supply rigidities. It is difficult to expand food output by pressing more land into production or gain rapidly from technology.
The unrestrained eagerness of half the world population to achieve rapid economic growth is causing structural changes in relative commodity prices. Commodity prices are now rising much faster than finished product prices, the very opposite of what prevailed for decades.
This has been creating commodity price ‘shocks' around the world, as global consumers have become subjected to rising commodity price premiums, rewarding producers for growing scarcity.
But the manner in which these events are being analysed keeps harking back to olden days, in which growth could easily be upset by higher prices and loss of consumer purchasing power, as well as creating substitution and conservation effects, eroding commodity demand just as supply was getting its act in gear, ere long creating surpluses instead of shortages, causing commodity prices to plummet anew.
When commodity-led price shocks came into view again this decade, the "shock" analysis from yesteryear continued to prevail. The rise in commodity prices was considered of a passing nature, one or two seasons at most. It might temporarily upset inflation, but it would pass.
But that view was appropriate in distant times when growth was slower and commodity demand seemingly more price-sensitive. In today's global climate growth seems more persistent, commodity demand less price-sensitive and supply less responsive.
The price mechanism still functions, offering reduced demand through substitution and conservation and increased supply in response to higher prices, yet commodity demand and supply have so far failed to match and prices have failed to stabilise.
What has come into view are not temporary price "shocks", but a process in which many commodity prices are steadily being elevated to higher levels. It reflects as much excess monetary accommodation in slowing economies as the global developmental scramble and its accompanying shortages of everything, including apparently cheap Chinese industrial labour (Greenspan's view).
That suggests global inflation being given a new impetus from relative price changes, which this time is not suppressing inflation (unlike decades past).
Instead, global inflation is being pushed on to a higher trajectory, more so in poorer countries with higher relative energy, food and other commodity needs, compared to richer, mature countries already more diversified beyond commodity-intensive needs.
The question facing all central banks: How to respond to this fallout from neighbourly binging? The global monetary boosting may be temporary, but developmental catch-up is a long-term phenomenon.
We can't undo the higher imported inflation, unless being favoured by an appreciating currency, neutralising the higher commodity prices. Or opt for a period of domestic underperformance.
So are we expected to maintain our real interest rates, and raise nominal interest rates in line with the rising inflation brought on by other people's commodity (and monetary) binging?
What will that accomplish?
If interest rates were held unchanged while inflation (and wages) rose, our real cost of credit would decline, inviting renewed spending binging of our own. That won't do when effectively at full production.
But if nominal rates are hiked further, keeping real rates unchanged, highly indebted households could find their cash flows pinched if they have aggressively leveraged debt.
That is not half as bad as it sounds, as improving export prices are bolstering our producers and farmers.
Still, having just enjoyed a long-running vigorous household boom in which indebtedness was greatly increased, getting caught by someone else's binging, higher inflation and consequent interest rate increases can be inconvenient. These past 18 months our households have already greatly moderated spending and credit growth.
What to do? The higher inflation is mostly injected by others, our own high indebtedness would make further interest rate hikes a costly affair incurring unnecessary growth sacrifice, but mining and farming are enjoying real income gains.
Will we for a while simply watch CPIX soar higher, fuelled by other people's food, oil and monetary binging? Our own growth is already taking a beating from our adjustment to earlier interest rate increases, and we wouldn't want to pulp spending growth even further?
There may be scope to stand aside, but not indefinitely. Either the world stops binging or we would eventually have to neutralise its inflation fallout.
HSBC France's 'Aa2/B-' ratings on review for possible downgrade - Moody's
March 03, 2008
Moody's Investors Service said it placed HSBC France's 'B-' bank financial strength rating (BFSR), 'Aa2' long-term debt and deposits ratings and 'Aa3' subordinated debt rating under review for possible downgrade.
The move follows the announcement that HSBC France is entering into exclusive negotiations with Groupe Banque Populaire (GBP) for the sale of seven regional banks of the HSBC France group.
Moody's said the sale of the seven regional banks, if finalised, could have a material negative impact on HSBC France's franchise.
The short-term debt and deposits rating is affirmed at 'Prime-1', the rating agency added.
Schroders 2007 profit up 35 percent
By Laurence Fletcher
04 Mar, 2008
LONDON (Reuters) - Fund firm Schroders reported higher-than-expected 2007 profits on Tuesday, lifting its shares, although it also said it expects a tougher business environment this year due to continued market volatility.
Pre-tax profit rose 35 percent to 392.5 million pounds, from 290 million pounds in 2006, helped by sales of higher-margin products.
Assets under management rose to 139.1 billion pounds at end-December from 128.5 billion pounds a year earlier, boosted by strong retail net inflows in Asia Pacific and the UK.
Schroders increased its final dividend to 21 pence per share from 17.5 pence, bringing the total dividend for 2007 to 30 pence.
At 9:40 a.m. Schroders shares, which have underperformed the FTSE 100 index by 24 percent over the past three months, were 3.8 percent higher at 961.5 pence.
However, the firm said market volatility that began with last summer's U.S. subprime meltdown was likely to persist this year, affecting its business.
"We expect ... volatile market conditions to persist through much of 2008 and as a result we envisage a less favourable environment for our business," the firm said in a statement.
A number of fund firms have warned of tougher conditions as investors become more cautious and withdraw assets. A record net 550 million pounds was withdrawn from British-registered retail funds in January, according to the Investment Management Association.
"This is not going to be over in the very short term ... Obviously it's having an effect on (industry) flows and we can't buck that trend, although relatively we won't be badly positioned," Chief Executive Michael Dobson said on a conference call to journalists.
He declined to comment on whether or not he expected net outflows for the business during 2008.
In October, the firm posted a higher-than-expected rise in third-quarter profit but said the market environment would become more challenging.
Last year Schroders, which traces its roots back more than 200 years, said it was very open-minded about selective small acquisitions but ruled out any transformational deal.
"Valuations have come way down and that's likely to produce opportunities in our view," Dobson said on Tuesday.
Landsbanki analyst Samir Shah said in a note that Schroders trades on a 2008 price/earnings (p/e) ratio of 9.4 times, a 21 percent discount to the sector.
"While the p/e multiple is lower than historical levels, general market sentiment towards traditional asset managers together with management's cautious outlook does not support a re-rating in the near term and we retain our hold recommendation," he said.
Thornburg Drops as Citigroup Sees Possible Bankruptcy
By David Mildenberg
March 3 (Bloomberg) -- Thornburg Mortgage Inc. lost more than half its market value after the home lender failed to meet $270 million of margin calls and a Citigroup Inc. analyst said bankruptcy is possible.
Thornburg fell $4.98, or 56 percent, to $3.92 at 12 p.m. in New York Stock Exchange composite trading. The Santa Fe, New Mexico-based company, which has struggled with falling prices for mortgages since the middle of 2007, may try to raise money by selling debt, equity or securities holdings, according to a statement today.
``Another downturn in the market could lead to significant risk to the company; a more dire turn in the market could lead to bankruptcy,'' Citigroup analyst Donald Fandetti wrote in a note to investors today. Fandetti cut his rating on the stock today to ``sell'' from ``hold'' and slashed his 12-month price target to $5 from $12.
Thornburg, a specialist in ``jumbo'' loans often used to buy more expensive homes, began running short on cash last August, even though the company didn't make subprime loans to people with the weakest credit. The stock's plunge today set a record low and ranked as Thornburg's biggest one-day loss since June 1993, leaving the shares down 84 percent in 12 months.
The company had been predicting a comeback from a $1.1 billion third-quarter loss last year that forced it to suspend lending and the quarterly dividend. Both were later resumed and Thornburg earned $64.8 million in the fourth quarter. Fandetti wrote today that the payout is likely to be cut off again.
Raising Money
The company isn't sure new cash or capital can be raised at acceptable prices, adding that failure may hurt Thornburg's ``ability to continue its business in the current manner.''
Thornburg spokeswoman Suzanne O'Leary Lopez said she hasn't seen Fandetti's report and declined to comment.
The lender expects to be profitable throughout this year, Chief Executive Officer Larry Goldstone said in a Feb. 28 interview. Thornburg said today it previously met more than $300 million of margin calls as of Feb. 27.
The company offers adjustable-rate loans too big to be sold to government-chartered Fannie Mae and Freddie Mac. Thornburg also invested in bonds backed by so-called Alt-A mortgage loans typically made to homeowners with credit scores that are above subprime and below prime.
Securities Trader And Former UBS Executives Plead Guilty To Massive Insider Trading Schemes
February 28, 2008
MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that MITCHEL GUTTENBERG, a former executive director in the equity research department of UBS Securities LLC (“UBS”), and DAVID TAVDY pleaded guilty today to participating in a massive insider trading scheme that netted millions of dollars in illegal profits. GUTTENBERG, 42, and TAVDY, 39, pleaded guilty in Manhattan federal court before United States District Judge DEBORAH A. BATTS. According to the Indictment and the guilty plea proceedings:
Between December 2001 and August 2006, GUTTENBERG repeatedly sold to TAVDY and another individual material, nonpublic information regarding upcoming upgrades and downgrades in UBS analysts’ securities recommendations (the "UBS Inside Information"). Investors, including institutional investors and professional money managers, regularly relied on UBS analysts’ ratings of public companies’ securities. As a result, changes in UBS analysts’ recommendations regarding a particular company’s securities were material to investors and often had a direct effect on the trading price of that company’s stock. Before UBS publicly releases its analysts’ upgrades and downgrades, they must be reviewed by the UBS Investment Review Committee ("IRC"). GUTTENBERG became a member of the IRC in December 2001, and, accordingly, was entrusted with the UBS Inside Information.
In breach of his duties of trust and confidence to UBS, and in violation of UBS's written policies, GUTTENBERG sold the UBS Inside Information to TAVDY and another individual, who each paid him hundreds of thousands of dollars. TAVDY and the other individual separately used the UBS Inside Information to execute hundreds of profitable securities transactions. By using the UBS Inside Information, TAVDY and the other individual earned some $15 million in illegal profits for themselves and for a series of hedge funds with which the other individual was associated. GUTTENBERG’s tips to TAVDY alone resulted in net profits of more than $10 million in brokerage accounts under TAVDY’s control and
the brokerage account of Jasper Capital, an entity though which TAVDY traded.
When GUTTENBERG communicated that UBS was about to announce an upgrade in its recommendation for a company’s stock, the recipient of the UBS Inside Information would purchase the stock. After UBS publicly announced its upgrade, the price of the stock generally would increase. The recipient then would sell the stock to earn a profit. Similarly, when GUTTENBERG communicated that UBS was about to announce a downgrade in its recommendation for a company’s stock, the recipient of the UBS inside information would sell the stock short. After UBS publicly announced its downgrade, the price of the stock generally would fall, after which the recipient would purchase the stock that he had sold short to earn a profit.
For example, on March 28, 2006, GUTTENBERG communicated to TAVDY that UBS was going to downgrade its rating on the stock of Caterpillar, Inc. That day, TAVDY sold short approximately 11,000 shares of Caterpillar stock in one of his brokerage accounts. The next day, March 29, 2006, UBS publicly announced that it was downgrading its rating on Caterpillar from "buy" to "neutral." Following the UBS announcement, on the same day, TAVDY covered his short position by purchasing approximately 11,000 shares of Caterpillar stock in the same brokerage account, resulting in a profit of at least $30,000.
Similarly, on May 25, 2006, GUTTENBERG communicated to TAVDY that UBS was going to upgrade its rating on the stock of Goldman Sachs Group, Inc. That day, TAVDY bought approximately 7300 shares of Goldman Sachs stock in one of his brokerage accounts. The following day, May 26, 2006, UBS publicly announced that it was upgrading its rating on Goldman Sachs from "neutral" to "buy." Following the UBS announcement, on the same day, TAVDY sold approximately 7300 shares of Goldman Sachs stock from the same brokerage account, resulting in a profit of at least approximately $20,000.
GUTTENBERG pleaded guilty to two counts of conspiracy to commit securities fraud and four counts of securities fraud. He faces a maximum sentence of 90 years’ imprisonment.
GUTTENBERG is scheduled to be sentenced on June 2, 2008 at 11:30
a.m. GUTTENBERG remains free on bail pending sentencing. TAVDY pleaded guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. TAVDY faces a maximum sentence of 45 years’ imprisonment. TAVDY is scheduled to be sentenced on June 30, 2008 at 11:30 a.m. TAVDY remains free on bail pending sentencing.
Mr. GARCIA, a member of the President’s Corporate Fraud Task Force, praised the efforts of the FBI and thanked the SEC for its assistance in the investigation.
Assistant United States Attorneys ANDREW L. FISH and JOSHUA A. GOLDBERG are in charge of the prosecution.
信任是经过日月累集而建立的，而失信却是在那一瞬间形成。
前世欠债，今生还债。
今生欠债，来世还债。
前世今生，无缘还债。
来生来世，一生相报。
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