The Hong Kong market has already surrendered most of last year’s gains in the first half and with concerns mounting about slowing overseas economies, market observers say the worst may be yet to come.
“We have many problems in front of us with the US market and Chinese market,” said Kingston Lin King-kam, an associate director at Prudential Brokerage.
“The third quarter may be a little bit better for the Hong Kong market, but after November, the market may keep on dropping,” Mr Lin said.
The Hang Seng Index has slumped 20.75 per cent or almost 6,000 points so far this year, including a bruising two-week decline in January when it fell more than 5,000 points. It ranks among the region’s worst-performing indices, having lost almost twice as much as Japan and South Korea.
Equity markets this year have turned into a punching bag for skittish investors fretting over the staggering United States economy, big shakeups on Wall Street, and record food and energy prices. And as if things were not bad enough, central bank officials in the US and Europe have hinted at a round of interest rate increases at the end of this year to beat back inflation levels.
The Hang Seng Index could fall below 20,000 points later this year if the Federal Reserve does increase its key interest rate, Mr Lin said.
“The global backdrop in the second half of this year is still going to be quite challenging,” said Khiem Do, the head of Asian multi-asset investment at Baring Asset Management. “But as far as the region is concerned, there may be some good news.”
Mainland inflation levels could slow to between 5 per cent and 7 per cent over the next few months as food prices, including pork costs, fall slightly, Mr Do said. And with cheaper valuation levels in Hong Kong following the first-half declines, the groundwork could be in place for a measured recovery in the market.
However, investor sentiment has soured so strongly it will take even more than that to sustain a rally.
“A significant correction in oil prices in the second half plus more friendly statements made by central banks, rather than their hawkish statements at the moment, would help the sentiment on stock markets and that could turn the market quite strongly,” Mr Do said.
“You need those drivers or catalysts to produce a turn because low valuations themselves cannot.”
A correction in energy prices would certainly boost oil-reliant companies, which have been devastated by the surge in costs.
China Petroleum and Chemical Corp (Sinopec) and PetroChina, the mainland’s largest oil refiners, have been among the worst performers on the Hang Seng Index this year, plummeting 37.61 and 27.77 per cent respectively.
In aviation, Cathay Pacific Airways has slumped 27.55 per cent as higher fuel costs squeezed margins.
Investors were not worried about oil prices during the bull market last year when the Hang Seng Index soared to a record 31,638.22 on October 30 with daily turnover routinely rising above HK$100 billion.
However, the market has since come crashing down and investors are trying to wait out the tough times. Trading levels have thinned as a result and may be unlikely to pick up again for some time.
Shares of Hong Kong Exchanges and Clearing, operator of the city’s stock exchange, have been battered this year as investors fear the trading slowdown will be reflected in the company’s bottom line.
After its shares almost doubled last year and paced gains in the Hang Seng Index, HKEx has been the index’s second-worst performer this year, plummeting 48.42 per cent.
Investors will search for key signs in the second half such as corporate earnings reports, trends in commodity prices, and monetary policy decisions to decide whether companies such as HKEx have already hit bottom or still have more room to fall.
However, some observers say with so many skeletons already out of the closet, the market has much more upside potential than downside.
“The market has already discounted a lot of negative potential news, including the local property market coming down, interest rates rising, and slowing earnings by Chinese companies,” said Steven Leung, a director of institutional sales at UOB Kay Hian.
“If all these start to be not true, then market sentiment could improve quite significantly.”
A couple has returned from their honeymoon and it was obvious to everyone that they are not talking to each other. The groom's best man takes him aside and asks what's wrong.
"Well," replied the man "when we had finished making love on the first night, as I got up to go to the bathroom, I put a $50 bill on the pillow without thinking."
"Oh, you shouldn't worry about that too much," said his friend. "I'm sure your wife will get over it soon enough - she can't expect you to have been saving yourself all these years!"
The groom nodded gently and said, "I don't know if I can get over this though: She gave me $20 change!"
It is quite possible that we are now at the most dangerous moment since the American financial crisis began last August. Staggering increases in the prices of oil and other commodities have brought American consumer confidence to new lows and raised serious concerns about inflation, thereby limiting the capacity of monetary policy to respond to a financial sector which – judging by equity values – is at its weakest point since the crisis began. With housing values still falling and growing evidence that problems are spreading to the construction and consumer credit sectors, there is a possibility that a faltering economy damages the financial system, which weakens the economy further.
After a period of intense activity at the beginning of the year with the passage of fiscal stimulus legislation, strong action by the Federal Reserve to cut rates and provide liquidity and the introduction of anti-foreclosure legislation, policy has again fallen behind the curve. The only important policy actions of the past several months have been those forced on the Fed by the Bear Stearns crisis. It would be a mistake to overstate the extent to which policy can forestall the gathering storm. But the prospects for a more favourable outcome would be enhanced if four actions were taken promptly.
First, the much debated housing bill should be passed immediately by Congress and signed into law. It provides some support for mortgage debt reduction and strengthens the government’s hand in its troubled relationship with the government-sponsored enterprises – Fannie Mae and Freddie Mac. While it is an imperfect vehicle – too limited in the scope it provides for debt reduction, insufficiently aggressive in strengthening GSE regulation and failing to increase the leverage of homeowners in their negotiations with creditors through bankruptcy reform – it would contribute to the repair of the nation’s housing finance system. Failure to pass even this minimal measure would undermine confidence.
Second, Congress should move promptly to pass further fiscal measures to respond to our economic difficulties. The economy would be in a far worse state if fiscal stimulus had not come on line two months ago. The forecasting community is having increasing doubts about the fourth quarter of this year and beginning of the next as the impact of the current round of stimulus fades. With long-term unemployment at recession levels, there is a clear case for extending the duration of unemployment insurance benefits. There is now also a case for carefully designed support for infrastructure investment, as financial strains have distorted the municipal credit markets to the point where even the highest-quality municipal borrowers are, despite their tax advantage, paying more than the federal government to borrow. There are legitimate questions about how rapidly the impact of infrastructure spending will be felt. But with construction employment in free fall, there will be a need for stimulus tied to the needs of less educated male workers for quite some time. Fiscal stimulus measures must be coupled to budget process reform that provides reassurance that, once the crisis passes, the fiscal policy discipline of the 1990s will be re-established.
Third, policymakers need to make a clear commitment to addressing the non-monetary factors causing inflation concerns. Though this could change rapidly and vigilance is necessary, it does not now appear that there are embedded expectations of a continuing wage price spiral. Rather, the primary source of inflation concern is increases in the price of oil, food and other commodities. Even if structural measures to address these issues do not have an immediate impact on commodity prices, they may serve to address medium-term inflation expectations. Appropriate steps include reform of misguided ethanol subsidies that distort grain markets to minimal environmental benefit, allowing farm land now being conserved to be planted; measures to promote the use of natural gas; and reform of Strategic Petroleum Reserve Policy to encourage swaps at times when the market is indicating short supply. Major importance should be attached to encouraging the reduction or elimination of energy subsidies in the developing world.
Fourth, it needs to be recognised that in the months ahead there is the real possibility that significant financial institutions will encounter not just liquidity but solvency problems as the economy deteriorates and further writedowns prove necessary. Markets are anticipating further cuts in financial institution dividends; regulators should encourage this to happen sooner rather than later and more broadly to reduce stigma. They should also recognise that no one can afford to be too picky about the timing or source of capital infusions and rapidly complete the review of regulations that limit the ability of private equity capital to come into the banking system. Most important, regulators should do what is necessary, including possibly seeking new legislative authority, to assure that in the event of an institution becoming insolvent they can manage the resolution in a way that protects the system while also protecting taxpayers. It was fortunate that a natural merger partner was available when Bear Stearns failed – we may not be so lucky next time.
Unfortunately we are in an economic environment where we have more to fear than fear itself. But this is no excuse for fatalism. The policy choices made in the next few months will matter to the lives of millions of Americans, to America’s economic strength and to the global economy.
The US Congress held hearings on Monday on the role that speculators play in shaping the oil market, specifically, the role they play in driving prices up.
Like most commodities, oil can be purchased and sold not simply for immediate delivery, but for receipt at some point in the future. The issue of the day rests in this “futures” market.
Normally, most of the players in the futures markets are industry players - largely shippers and refiners - who simply are planning ahead. After all, why purchase crude oil at the last second and risk that none will be available when one can purchase a futures contract that will ensure delivery in, say, September? If August rolls around and it turns out you do not need all the crude you in effect pre-purchased, one can simply sell the extra futures contract and buy a new contract for October delivery. In essence, it’s the industrial equivalent of keeping a spare can of gasoline in your garage.
But there are other players in the futures markets, too: investors who have no intention of ever taking delivery of any shipment. Instead, they play the market in a bid to profit from price fluctuations. Such speculators used to be marginal players, but right now there are a lot of these folks. Some estimates put them at more than two-thirds of total traders by volume. Part of this jump is thanks to the subprime lending mess. When the mortgage market cracked in late 2007, many who made their living trading mortgage securities and property fled into the energy markets.
Defenders of speculation claim that anything that increases the number of participants will increase efficiencies and lower prices in the long run. Detractors of speculation assert that - as with any other market - when more money chases after a set amount of product, prices rise. And in this case, unnecessarily so.
Not to muddy the waters, but both are right, and wrong. The more market players there are, the less likely it is shocks will occur and the less severe those shocks will be. Large, deep markets tend to iron out disruptions due to sheer size. At the same time, when a large proportion of the market players do not actually ever intend to receive the product, the result is indeed a price overhang.
This raises two questions: how big of an overhang, and what to do about it?
Some of those testifying before Congress projected that without speculators the price of oil would fall by half in a month. While Stratfor certainly senses that speculators are having a demonstrable impact, we have a hard time believing the oil issue is that simple.
If Saudi Arabia makes good on its weekend pledge to increase oil output, global spare production capacity will slide to less than 1 million barrels per day, a historic low. Add in remarkably robust resilience from China and the United States and a price crash seems a stretch, even though a price moderation is certainly possible (and even likely) with the right mix of regulation. Oil is scarce, oil is needed, oil has no obvious substitutes, and there is nothing that anyone can do to bring more of the stuff onto the market quickly. That is a perfect storm for expensive crude, and no amount of regulatory change is going to alter this bottom line.
Yet some level of regulation is imminent for two reasons, one structural, the other political.
Structurally, speculators serve a crucial function under normal circumstances. When stock markets hit ridiculous highs, the exuberance of speculators overwhelms the system and quickly forces a market spike to become a market collapse (think the April 2000 dot-com crash). These collapses predominantly hurt only speculators and force some much-needed rationality into the system. But in strategic commodities such as oil or food, price spikes can wreak havoc on society.
And when that happens, regulators cut in. Regulation makes the system more inefficient, but so does out-of-control speculation. Unless it is very bad regulation, however, it does not stop the forces of supply and demand from functioning. A market with runaway speculation, on the other hand, can do that.
Politically, there is more going on here than simply crude going for more than US$130 a barrel, gasoline at US$4 a gallon, and a summer driving season only just under way. The United States is in full election mode, neither candidate has a vested interest in defending the status quo, and there are 300 million Americans out there who are getting fed up with prices that make the Hurricane Katrina aftermath look cheap.
Taking some sort of action on energy is a political no-brainer, and “speculators” are the perfect faceless foe. Congress and both presidential candidates are in the mood to act, and to act quickly.
The trick will be to hit the right balance, and that is no sure thing. If it were, it would have been done ages ago. Futures trading is an essential leg of energy markets, and finding a way to separate those not actually interested in getting hold of the black gooey stuff from those who do will not be simple.
Any regulation that fails to do just that won’t just hurt speculators, it will disrupt the global energy network. And if that were to happen, US$130 a barrel would look cheap indeed.
SHANGHAI, China (AP) -- Chinese motorists, long accustomed to cheap gas, seemed to take in stride a government decision to boost fuel prices Friday by as much as 18 percent.
"Maybe I might drive a bit less. But if it's for business, then if I have to drive, I will," said He Ping, a trading company employee who was refilling his VW Jetta at a Beijing gas station.
There were at least a dozen vehicles waiting behind him in line.
While higher prices for China's state-controlled fuel will inevitably squeeze consumers at both filling stations and grocery stores, analysts say it is unlikely to make an immediate or huge dent in the country's hunger for oil.
China's economy is booming, and people are buying cars and air conditioners as their incomes grow. There is huge pent up demand in a country of 1.3 billion, where per capita energy consumption remains far below western nations.
"It's still affordable," said a man who was filling up his car, who gave only his surname, Pan.
The 12.6 gallons of gas Pan bought cost him 318 yuan ($46). That's $3.65 a gallon.
The silver lining is that with the government increasing prices, refiners may finally boost production of gasoline, diesel and other refined products, helping to alleviate long lines at gas stations and a widespread fuel shortage.
Refiners have cut production because they were losing money on the wide gap between global crude oil prices and state-set retail prices. While the government paid billions in subsidies to China's two big state-owned refiners, many smaller refiners were shutting down.
"Do not expect an immediate fall in China's oil imports - the price effect on demand will work in China as well, but it will take some time to work through," Wang Tao, an economist for UBS Securities, said in a report issued Friday.
Crude oil prices Friday jumped more than $4 per barrel at one point on the New York Mercantile Exchange after tumbling the day before on news that China's National Development and Reform Commission would raise prices for gasoline and diesel fuel by 16 percent and 18 percent respectively.
Some analysts said the oil market may have overreacted to the news from China, with some traders buying oil futures on the belief that their climb will continue.
"Whether domestic demand cools, or the price increase simply serves to bring more refining capacity on-line to satisfy China's voracious appetite, remains to be seen," said Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co.
The government last hiked fuel prices by about 11 percent in November. It froze prices to avert further inflation, which has touched 12-year highs since the beginning of the year.
U.S. shares for Petrochina and Sinopec jumped Thursday when the price hikes were announced, but tumbled on Friday. Petrochina fell $6.51, or 4.6 percent, to $133.98, and Sinopec lost 5.2 percent, to trade at $39.81
The hike raised the price of gasoline by 1,000 yuan ($145) per ton to 6,980 yuan ($1,015) and diesel by the same amount per ton to 6,520 yuan ($949) per ton. Aviation kerosene rose by 1,500 yuan ($218) per ton to 7,450 yuan ($1,084), the commission, known as the NDRC, said on its Web site.
To protect individual consumers, the government said it would not allow any increases in bus and subway fares or taxi fares. Natural gas and liquefied petroleum gas prices will remain unchanged, and subsidies to the poor and to grain farmers would increase, it said.
Areas in Sichuan province, hit by a massive earthquake last month, were exempt from the increases, state media reported.
The government will pay nearly 20 billion yuan ($2.9 billion) in subsidies to help cushion the impact of the price hike, the official Xinhua News Agency reported.
Still, the move is widely expected to boost inflation - a major concern for Beijing.
China's inflation rate fell in May to 7.7 percent from 8.5 percent the month before, mainly reflecting lower food prices. But economists warn that higher costs for crude oil and other commodities pose a long-term threat.
Despite surging oil costs, China's imports of both crude oil and oil products have surged to unprecedented levels as it builds up national stockpiles, while exports have plunged. Crude oil imports rose to 59.8 million barrels in January-April, up 10 percent from a year earlier.
Gasoline imports skyrocketed by nearly 20 times to 554,000 tons in January-May while imports of diesel jumped by more than nine times, to 2.9 million tons.
Pinched by surging costs for labor, land and materials - as well as energy - Chinese industries are finally beginning to cut back.
China Ocean Shipping (Group) Co., a huge state-owned shipping company, announced earlier this week that it was cutting the speed of its ships by 10 percent to help reduce fuel consumption and conserve energy.
It takes millions of dollars to have lunch with someone who controls billions.
A Chinese investment fund manager won the chance to have lunch with billionaire Warren Buffett by bidding $2.1 million in the most expensive charity auction on eBay.
Zhao Danyang, of Hong Kong-based Pure Heart China Growth Investment Fund, won the auction, which ended on Friday evening with a bid of $2,110,100.
A spokeswoman for the Glide Foundation, which receives the proceeds from the auction, identified Zhao as the winner on Saturday. The foundation is a non-profit organization in San Francisco's Tenderloin district that helps serve the poor and homeless people.
Zhao and up to seven friends will dine with Buffett, the 76-year-old chairman of Berkshire Hathaway Inc, at the Smith & Wollensky steakhouse in New York City whenever the two men can schedule it.
The five-day online auction ended on Friday night on eBay Inc's website. After starting at $25,000, a battle broke out between two bidders in the final stretch, with bid prices jumping seven-fold in two hours.
It is the most expensive charity bid in eBay history, topping the $2.1 million paid for a letter to radio talk show host Rush Limbaugh, a spokeswoman said.
"It almost feels like a miracle," Glide's founder Reverend Cecil Williams said. "We are amazed and ready to continue our work of breaking the cycle of poverty."
The investment philosophy Zhao's fund describes on its website is similar to Buffett's approach of finding companies with an enduring competitive advantage that are selling for significantly less than they are worth.
Chinese media reports said Zhao's Pure Heart is the first legal private investment company (usually called China version of hedge fund) in the country.
Zhao graduated from Xiamen University on the Chinese mainland as a system engineer, the Pure Heart website says. He went abroad in 1994, where he honed his investment skills in running industrial enterprises and trading.
He began his career in the securities business in 1996 and has more than 10 years' experience in asset management, and has managed overseas and domestic listed securities.
Zhao is one of the leading players in promoting the philosophy of "selecting securities investment from the view of an industrial investor".
Buffett has been auctioning off lunches online for six years but began auctioning the lunches for Glide off-line in 2000. He offers only one lunch a year.
BANGKOK - Recent reports and a Time Magazine feature released last week have exposed that the fastest-growing niche genre within Japan's massive and multifaceted adult film industry is pornography for, and featuring, the elderly.
The market for elder porn - some have called it "Grandpa porn" - has doubled over the past decade, a producer of "mature-women" movies told Time, and the sector seems to be enjoying what could be called a "golden age". A recent Japanese population study found that by 2025, 27%, or 33.2 million people in Japan, will be aged over 60. It stands to reason, then, that the market for audiences - as well as actors - is growing. This fact has hardly been overlooked by adult film entrepreneurs in the highly competitive pornography market.
Studies suggest that elder porn - adult videos with "actors" sometimes in their 70s - appears poised to be the next big money maker for the billion-dollar Japanese porn sector. Over the past few years, some have estimated that thousands of productions using older - even senior - porn talent have been released in the domestic pornography market; some have begun seeping overseas.
Having an active sex life well into old age is perfectly normal. However, launching a new career as a septuagenarian porn star is odd, if not awe-inspiring. Take 74-year-old Shigeo Tokuda (his stage name) who in the 14 years since retirement has appeared in over 350 adult films such as Maniac Training of Lolitas (2004) and Forbidden Elderly Care (2006).
As Time reported last week, "The Shigeo Tokuda series he has just completed portray him as a tactful elderly gentleman who instructs women of different ages in the erotic arts, and he boasts a body of work far more impressive than most actors in their prime."
There is a unique audience within Tokuda's age group he believes: "Elderly people don't identify with school [aged-girl] dramas," he says, speaking of standard-issue Japanese porn. "It's easier for them to relate to older-men-and-daughters-in-law series, so they tend to watch adult videos with older people in them.
"People of my age generally have shame, so they are very hesitant to show their private parts," Tokuda said in his recent interview with Time. "But I am proud of myself doing something they cannot. That doesn't mean that I can tell them about my old-age pensioner job."
If Tokuda ever wants to talk shop with a like-minded artiste, he may have to go to Russia where 75-year-old David Bozdoganov has also become a porn legend. The story of Bozdoganov, as recounted on Ananova.com, began when the Russian wandered into a porn audition after mistaking posters for seeking "erotic actors" as advertisements for a muscleman show. The rest is X-rated history.
Although Bozdoganov went on to produce an oeuvre that includes The Old Neighbor and The Handyman at Work, he has experienced some generational issues. As the Russian website reported: "His female co-stars always complain because David believes in the beneficial power of garlic and insists on rubbing it on his erection before a scene and it's rather smelly."
In Japan, so-called mature productions aren't just attracting men. In recent years, there has been increasing use of female performers, some of whom have also been in their 70s. This is a bold development for an industry that traditionally labels women in their mid- to late-20s as "mature". Usually, only "title girls", or the extremely beautiful, can headline top-selling productions once they reach their mid-20s.
Trends suggest that elder porn, boosted by demographics and profit-minded producers, won't get old any time soon. The total revenue spent on pornography in Japan - in the form of videos, magazines, anime, hentai, manga and adult-oriented role play video games - was a staggering US$19.98 billion for the fiscal year 2006. The US, by comparison, spent $13.33 billion for the same period.
Profits aside, there may be some societal benefit form elder porn as well. Perhaps such "seasoned" performers may be able to jump-start Japan's sagging sexual activity rates. For example, the World Health Organization reported in March that 25% of married Japanese couples had not had sex in the last year, and that more than one in three married couples over 50 said they no longer had sex at all.
And although the elder sex set won't do much to boost Japan's declining birth rate, it may stimulate healthy, fulfilling lifestyles among what will soon be the world's oldest population.
As for veteran porn star Shigeo Tokuda, he told Time he plans to keep working until he's 80 - or older.
Japan's Nikkei falls for 8th day as investors brace for weak 'tankan' survey
June 30, 2008
TOKYO (AP) -- Japanese stocks stretched their losing streak to eight straight sessions Monday as a falling dollar hurt exporters and amid dire projections for a closely-watched business sentiment survey to be released Tuesday.
Reversing early gains, the benchmark Nikkei 225 stock average closed down 62.98 points, or 0.46 percent, at 13,481.38. The index has shed more than 900 points, or about 6 percent, this month.
Analysts predict that Bank of Japan's quarterly "tankan" survey will reflect growing corporate concerns about business conditions.
"High energy prices and increased uncertainty over the U.S. economy provide the major background to the weakness in sentiment," said UBS economist Akira Maekawa in a preview report.
A falling dollar added to the concerns, hurting exporters including automakers and electronics manufacturers.
Fuji Heavy Industries Ltd., maker of Subaru-brand cars, slid 4.6 percent to 520 yen. Toyota Motor Corp. Japan's largest automaker Toyota Motor Corp. retreated 1.2 percent to 5,010 yen, and Nissan Motor Co. ended down 1.5 percent at 877 yen.
Sony Corp. plunged 4.1 percent to 4,640 yen - its lowest level in almost two months.
Among gainers, issues in the oil and coal products sector strengthened after crude futures spiked to a record $142.99 a barrel in New York Friday.
Nippon Oil Corp. soared 7.4 percent to 713 yen, and Nippon Mining Holdings, Inc. jumped 3.6 percent to 665 yen.
Power companies also gained, with both The Tokyo Electric Power Co., Inc. and The Kansai Electric Power Co., Inc. both adding about 3.8 percent.
The broader Topix index of all First Section issues on the Tokyo Stock exchange fell 0.04 percent to 1,320.10.
In currency trading, the dollar fell to 105.28 yen by late afternoon, down from 106.14 Friday. The euro gained slightly against greenback to US$1.5797 compared with US$1.5794.
The dollar was mixed against other major Asian currencies. It fell to 1.3605 Singapore dollars and 30.3540 Taiwan dollars, while gaining to 44.7850 Philippine pesos.
Look at these numbers: 21, 35 and 1,000. What kind of vital statistics would you say these were? The amount of calories you need to deny yourself to get back into shape? The number needed on your point card to earn the cash back you covet at your local supermarket?
Neither is, of course, the answer. All three figures represent the same thing, in fact. They are the price of an ounce of gold as calculated in U.S. dollars. The difference is in the timing. In the 1920s, $21 would buy you an ounce of gold. That was the official rate at which the U.S. Federal Reserve would trade gold with anyone who wished to make the transaction. From the mid 1930s to 1971, that official dollar-for-gold conversion rate was fixed at $35 per ounce.
Those fixed conversion rates were called the dollar's gold parity. Now the dollar no longer has a gold parity. The price of gold, just like any other commodity, is determined by the markets. And earlier this year, there was a point at which the market price for gold soared to $1,000 per ounce.
Up until the mid 1930s, most major currencies had gold parities. They were convertible to gold at that rate whenever anyone went along to the relevant central bank to request the exchange. This was the time of the international gold standard. It was a time of great currency stability, because by definition, foreign-exchange rates could not deviate very far from the fixed gold parities. Whenever that was liable to happen, gold would flow out of a country that had a depreciating currency, causing its economy to shrink. This was because the amount of money the country could create was linked directly to the amount of gold in its possession.
No gold, no money. No money, no growth. And where there is no growth, there are no imports. No imports means no trade deficit. No trade deficit means no currency depreciation. Thus, the exchange rate would slide back up toward the currency's gold parity, and everything would quiet down again. Stability would be restored.
Life was simple then, but at the same time very static. Since countries could not run trade deficits for very long, they were effectively prevented from living beyond their means. That made it very difficult for them to grow. This constraint on growth was the basic reason why the gold standard broke down. With Britain taking the lead, major nations began to go off the gold standard in the 1930s, triggering of an exchange-rate war, the severity of which was well documented in many an academic study.
Some seventy years on from those currency warfare days, and thirty-odd years from August 1971, when the United States finally went off the gold standard, suggestions are now being made that maybe it's time to revive the international gold standard so that the extreme currency instability of these recent months and weeks can be put to rest. The very fact that gold is being so highly priced by the markets, proponents claim, is a sign that the world is ready for the revival of gold parities among nations.
The suggestion has its merits. Perhaps the global economy could do with a dose of the extreme discipline the gold standard imposes. For the prime feature of the global economy is that it has absolutely no discipline whatsoever.
Yet discipline will come at a price. The global economy would suffer a severe shrinkage. But then again, such a shrinkage might come anyway if the economics of greed maintains its current pace, gold standard or no. We live in dangerous times.
Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.
FRANKFURT: As the United States markets edge toward bear territory, losing nearly 20 percent of their value from last fall's peak, investors might wonder where they can turn for relief.
The gloomy answer: nowhere.
Many of the major markets in Europe and around the world have already entered a bear market. Germany and France are among the markets suffering the most, and once high-flying emerging markets in countries like China and India have collapsed even more drastically.
Higher inflation, exploding energy costs, troubled credit markets and worries about an inflationary psychology, it turns out, are global concerns. And fixing these problems — and bringing optimism back to stock markets worldwide — is proving to be difficult for central bankers, who are trying to contain inflation without risking even slower growth.
"The recent downturn in equities is essentially about investors worrying that central banks are going to be tougher than anyone had expected," said Erik Nielsen, chief Europe economist at Goldman Sachs.
The market numbers are uniformly grim.
In Europe's largest economy, Germany, the benchmark DAX index is off slightly more than 20 percent this year, and the CAC-40 in France is down almost 22 percent. The Euro Stoxx 50, a gauge for the 15-nation euro zone, has declined by about 24 percent. The nearly 15 percent decline in the FTSE 100 in Britain looks tame by comparison.
Emerging market indexes have fared even worse. The Hang Seng in Hong Kong has plunged nearly 21 percent, the Shanghai Composite has lost nearly half its value this year. The Bombay 500 in India lost about 38 percent.
The declines at major stock markets worldwide suggest that the same economic concerns are in play: rising inflation, which has been caused for the most part by record oil prices. U.S. crude oil futures hit a new high of $142.99 a barrel on Friday.
And central banks around the world, including the United States, are indeed moving to head off resurgent inflation by raising interest rates. While such a move can contain inflation, it can also squelch growth. Indeed, the likelihood of higher interest rates has already been fueling the market sell-offs as investors around the world try to digest all manner of bad economic news.
In Australia, inflation is running near its highest level in 16 years, and in March the central bank raised the benchmark lending rate to a 12-year high. The People's Bank, China's central bank, tightened credit again this month by raising banks' reserve requirements for a second time. China is struggling to control inflation without hurting its fast-growing economy; the same story is playing out in Indonesia and India.
On Sunday, the world's top central bankers began a two-day meeting in Basel, Switzerland, where they were considering approaches to calm nerves about inflation while avoiding a shock to economic growth. The United States is near or in recession, while growth is fading in Europe.
On Thursday, the European Central Bank may take matters into its own hands. In all likelihood it will raise its benchmark interest rate by a quarter percentage point, to 4.25 percent, hoping to curb inflation of both food and energy prices. Prices in the 15-nation euro area rose by 3.7 percent in the year through May, nearly double the bank's informal goal of just below 2 percent.
The Federal Reserve appears poised to follow suit. Last week the central bank voted to hold the short-term federal funds rate steady at 2 percent, ending a series of rate cuts. But it also hinted strongly that worries about inflation might compel it to raise the rate later this year. The rate affects what consumers pay for mortgages, car loans and other credit.
"Europe tends to paint this in black and white," said Ethan Harris, chief United States economist at Lehman Brothers in New York. "In the U.S., the balancing act is going on."
The absence of a unified global strategy for calming inflation has not been lost on investors who are searching for an anchor of stability, and coming up short.
"When you have central banks around the world doing different things — following a different road map — that can be problematic," said Quincy Krosby, chief investment strategist at The Hartford, a financial services firm.
Then there is the politics.
The European Central Bank's decision to get out in front is being debated in Europe, where growth is cooling under the pressure of oil prices, the strong euro, and fading demand in the United States. The bank's primary mandate is to keep inflation low, but that does not stop European politicians from worrying about growth.
Oil prices, while an enormous factor in the decision-making that will go on this week in Europe, are only part of the calculation. A more generalized inflation, feeding through to consumer prices and influencing demands for higher paychecks, also deprives businesses of the confidence that they had until recently about how to make decisions on building factories, hiring employees or developing products.
"The longer inflation remains high, the more damaging it will be for longer-term economic growth prospects," Morgan Stanley wrote in a report about inflation creeping upwards worldwide. "High inflation rates usually go hand-in-hand with a higher variability of inflation, which raises uncertainty and can thus reduce investment spending."
Stock market volatility caused by inflation worries has also complicated the pressing task of recapitalizing banking systems, above all in the United States but also in Europe.
As equity markets crumble, much-needed recapitalizations "become more and more difficult" because investor appetite for new sales of shares declines, Mario Draghi, the Italian central bank chief, who heads global efforts to reform financial regulation, said last week. Efforts to overcome the credit squeeze, in other words, have become hostage to the economic slowdown that the squeeze helped create.
Two company cases show what Chinese regulators didn’t know about how execs exercised their option, and how rich it made them.
By Wen Xiu 2008-06-30
Case I – China Mobile
China Mobile launched a stock option incentives program in 1997. Initially, options were awarded to the company chairman and senior executives, but later more options were offered to executives at company branches.
Company President Wang Jianyu was awarded options for 600,000 shares in December 2004, and received even more the following year. At present, Wang’s nominal annual salary is about HK＄ 5.05 million. But that does not include his options for 970,000 shares, which excludes the 40,000 options Wang exercised in 2007 and 85,000 in 2006. Thus, Wang is entitled to nominal earnings of more than HK＄ 105 million, and net earnings of more than HK＄ 73 million after deducting options costs.
Likewise, five other China Mobile senior executives and board directors are altogether entitled to 780,000 stock options, leading to potential net earnings totaling HK＄ 60 million. China Mobile gave these awards to another six directors in March 1998, but none exercised the rights.
Two directors surnamed Shi and Chen exercised their rights for stock options in April 1999 as they departed the company, netting HK＄ 22.27 million. A year later, former deputy chairman Li Ping exercised his options – with a corresponding market value totaling HK＄ 224 million – before he left his post. They earned him HK＄ 147 million.
In 2001, senior executives and directors did not exercise their stock options. But an unidentified number of employees exercised their rights to stock with a market value of 295 million yuan.
At the annual general meeting for shareholders in June 2002, China Mobile abolished the stock option program and replaced it with a new program effective for 10 years. Likewise, other state-owned enterprises listed in Hong Kong revised their stock-related incentive plans that same year.
The new China Mobile program is being applied to a broader range of employees and includes a shorter stock option lock-up period with few or no restraints. China Mobile said the board may take the liberty of inviting anyone from senior management and a core talent pool from all subsidiaries to claim stock options. Also, up to 40 percent of stock options granted in 2004 could be exercised within one year, while 30 percent could be exercised in the third and fourth years.
Data showed that, from 2004 to ’07, more than a dozen large stock options were exercised. These included six occurrences in 2006 and ’07. Total earnings from these deals reached HK＄ 10.8 billion.
Case II – COSCO
In May, COSCO Investment (Singapore) Limited Co. President Ji Haisheng was told by his superior that he should file a report pertaining to stock options among senior executives. COSCO is in the marine shipping business and lists on the Singapore Stock Exchange. It is 53 percent owned by COSCO Holding, a subsidiary of the state-owned enterprise China Ocean Shipping Group Co. (COSCO).
On the back of rising stock prices throughout 2007, Ji and other senior executives exercised their stock options. Their moves, however, did not meet with a state policy to tighten up the use of stock option incentives at state-owned companies.
However, since COSCO updated its stock option program, the company has made aggressive moves. For example, non-executive board members were allowed to claim stock options after serving just one year. Also, the chairman and president were given no limits for stock option entitlements. In addition, selected senior executives enjoyed multiple shareholding-related incentives from several listed subsidiaries.
COSCO worked out a stock option incentive plan as early as 2002. By the end of 2007, the company had awarded its board members a total 38.8 million stock options. Among these, 28.9 million stock options, or 70 percent, had been exercised.
Even after the State-owned Assets Supervision and Administration Commission (SASAC) ordered overseas listed companies to strictly regulate their stock options, COSCO officials showed no sign of slowing their incentive program.
Ji said in a phone interview, “COSCO Investment, as it is listed in Singapore, should abide by local rules and regulations.” He said he did not understand many of the SASAC regulations and was awaiting further explanation from the authority.
As Ji sees it, his contribution to the company over the past five years proves he is entitled to the stock options. “COSCO Investment made miracles in Singapore because our share value grew from less than SG＄ 100 million to today’s SG＄ 10 billion,” Ji boasted. “Singaporean media call me ‘superstar’ because I created numerous millionaires, even billionaires.”
On April 10, COSCO announced a new contract worth US＄ 292 million, but also canceled a separate order worth US＄ 202 million. In what seems a coincidence, company CFO Teo Chuan Teck later resigned due to “personal reasons.”
A source with knowledge of the matter said many contract orders that COSCO released were only memorandums that could be canceled without informing the public.
Investors reacted quickly. The company’s stock price slumped 15 percent, posting its biggest loss in company history.
Another controversy stems from the multiple incentives for senior executives. For example, Wei Jiafu, president of the parent company COSCO Group, can benefit from increased stock values tied to at least four listed subsidiaries. This is on top of the stock options he already possesses. In the same boat are company Deputy President Li Jianhong and business department chief Sun Yueying.
The world's top central banking body has said the world economy could be in for an unexpectedly severe downturn. The Bank for International Settlements blamed lax credit for fuelling the current financial crisis.
The bank, known as the central bankers' central bank, suggested that interest rates should tend towards vigilance even in good times in order to discourage excessive borrowing.
While it was difficult to predict the severity of a downturn, it appeared that a 'deeper and more protracted global downturn than the consensus view seems to expect' was on the way, the BIS said.
It dampened hopes that booming emerging markets would offset the slowdown, saying that many of these markets were significantly dependent on external demand, notably from the world's largest economy the US.
The BIS argued that the sub-prime mortgage market - loans given to borrowers with poor credit ratings - was not a root cause of the turmoil on financial markets, but only a trigger.
The bank said years of cheap borrowing had led to an extraordinary accumulation of debt. It pointed out that in the US, the ratio of household savings to disposable income was about 7.5% in 1992. The ratio fell sharply in the early 2000s. By 2005, it had plunged to almost zero.
When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen.
More than three million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.
Those stark numbers not only illustrate the challenges for the lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble — the Congressional Budget Office estimates it would be used by 400,000 borrowers — and would do little to bolster the housing market.
“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of people who will be helped “is going to be overwhelmed by the three million that are headed toward default.”
Last week, the Senate voted overwhelmingly to advance the bill, and the House passed a version last month. Because of procedural delays in ironing out differences between the two houses, the Senate is not expected to pass the bill until after the Fourth of July recess.
The bill would let lenders and borrowers refinance troubled mortgages into more affordable 30-year fixed-rate loans that are backed by the government. Democratic leaders say Congress could send something to the president next month.
The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed.
“The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes,” President Bush said on Thursday.
Representative Barney Frank, Democrat of Massachusetts and a central force behind the legislation, said on Friday that recent reports about falling home prices have rallied support for the plan. But he acknowledged that the plan may not do enough to help homeowners or the housing market. Mr. Frank, chairman of the House Financial Services Committee, said that even after a bill like this, “you may need more.”
Other proposals that have been floated in Washington include expanding the current plan to make it mandatory instead of voluntary for certain home loans; having the government buy loans outright from lenders; and providing some way and some incentives to let homeowners become renters in their own homes.
But not everyone supports government interventions. Some Republicans, like Senators Jim DeMint of South Carolina and Jim Bunning of Kentucky, say the proposal would use government subsidies to bail out reckless lenders and borrowers. They suggest that the housing market will correct itself more quickly if Congress does not intervene.
The biggest impediment to helping homeowners is the weak economy. In addition to falling home prices and risky loans, homeowners are now confronting a tough job market. The unemployment rate has risen to 5.5 percent, up from 4.9 percent in January.
Mortgage rates have also been climbing. An estimated nine million homeowners owe more than their homes are worth and could find themselves with few options if they lose their jobs or if their mortgage bills rise substantially.
To take part in the proposed program, lenders would have to lower each debt obligation to 85 percent of the home’s current value. Borrowers would stay in their homes but would have to pay a 1.5 percent annual insurance premium. If homes’ values grow and borrowers sell or refinance, they would have to share the gain with the government.
The program would be managed by the Federal Housing Administration and paid for by the insurance premium, as well as a 3 percent fee paid by lenders and a tax on Fannie Mae and Freddie Mac, the government-sponsored buyers of mortgages. (The refinance proposal is part of a broader housing bill that would also overhaul laws relating to the two companies and the F.H.A.)
To qualify, borrowers would have to be in enough trouble that they could not afford their current mortgage payments but financially strong enough to make payments on their new loans.
“No matter how you fiddle with terms of their present situation, it’s not going to save the day” for many borrowers, said Bert Ely, a housing finance consultant based in Washington. “They are not in a good financial situation because they have lost their jobs and they are overburdened with credit cards and home equity loans.”
The effectiveness of the bill will depend to some extent on how it is handled by the F.H.A., an agency created during the Great Depression to insure home loans. It will have several challenges: persuading the lenders who made second mortgages and home equity loans to cooperate; screening loans to make sure borrowers have a good shot at keeping their homes after refinancing; and weeding out those trying to take advantage of the system.
Second mortgages and home equity loans were popular during the housing boom and often allowed Americans to buy a home with little or no money down or let them take out cash against their homes as prices rose. Now, home values have fallen so much that there is little or nothing left to pay off these loans when homes are sold or repossessed. The Congressional Budget Office estimates that about 40 percent of riskier mortgages made in recent years are coupled with such secondary loans.
Under the Congressional plan, these loans would have to be eliminated before homes could be refinanced. People who negotiate loan modifications say holders of second loans have been reluctant to take losses, and lenders with first loans are often unwilling to give them enough money to secure their cooperation. Under the Senate version of the plan, the F.H.A. would have some leeway in negotiating with borrowers who have second loans.
Another challenge for the F.H.A. would be selecting borrowers who have the best chance of paying off new loans. The agency would have to make sure lenders are not unloading only their worst loans, and lenders and the F.H.A. would have to guard against borrowers who can pay their current loans but would like a cheaper, government-backed loan.
Even if the agency insures hundreds of thousands of new mortgages, analysts do not expect the tide of foreclosures to ebb until the economy improves markedly. Mr. Zandi and others forecast that two million to three million mortgages will default — beyond the three million in trouble now — and economists at Lehman Brothers say home prices nationally may drop 15 percent by the end of 2009. That may force policy makers to consider further interventions.
“In this rush to legislate and with the lack of discussion of a lot of issues, people will look at this bill in the winter and say we shouldn’t have done this, we shouldn’t have done that,” said Mr. Ely, who closely followed the savings and loan debacle. “The politics are going to be so different come next year. There will be another administration, and who knows what the makeup of the House and Senate will be.”
There is a precedent for such government endeavors, but not since the New Deal. In the 1930s, the government created the Home Owners Loan Corporation to buy mortgages and modify them. In three years, it bought a fifth of the country’s home loans, said Alex J. Pollock, a resident fellow at the American Enterprise Institute in Washington.
“We won’t need to do anything of that magnitude here,” he said.
An official for the Mortgage Bankers Association, a trade group in Washington, acknowledged that the proposal may not help the majority of troubled borrowers, but said it would be a good start and would help restore confidence in the financial markets and the economy.
“There is no silver bullet,” said the official, Steve O’Connor, a senior vice president of the association. “There is no single solution to the housing crisis. It will take multiple tools to turn the housing market around, and it’s going to take time.”
(CNN) -- Malaysian opposition leader Anwar Ibrahim came out of hiding Monday, and says he has damaging evidence that proves senior members of the government faked evidence for sodomy charges against him.
"I have new evidence about the fabrication of evidence against me in 1998," Anwar told CNN Monday. "I totally reject these malicious attacks."
Anwar was the heir apparent to former premier Mahathir Mohamad until 1998, when he was sacked and charged for corruption and sodomy.
The sodomy conviction was overturned, but the corruption verdict was never lifted, barring him from running for political post until this year.
In the CNN interview, Anwar rejected the sodomy charges and also said he had evidence of threats on his life that caused him to go into hiding at the Turkish embassy in Kuala Lumpur.
CNN could not immediately reach members of Malaysia's ruling party.
The ruling party, National Front Coalition, has lead Malaysia since the country declared independence in 1957. Anwar's opposition party has gradually chipped away at the National Front's power.
Recently Malaysian police have said they are investigating a new sodomy charge against him, Anwar said.
The new charges were also false and were fabricated to usurp his political gains, Anwar said.
"I will challenge these attacks on every ground," Anwar said.
BRUSSELS / AMSTERDAM (DFT) - Fortis expects within the next few days to weeks to complete the collapse of the U.S. financial markets. That explains the bank insurers interventions of the series Thursday at dealing with € 8 billion. "We are ready at the last minute. It goes in the United States much worse than thought, "said Fortis chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies of 6000 U.S. banks that now lack coverage. "But Citigroup, General Motors, there begins a complete meltdown in the U.S.."
Fortis took yesterday € 1.5 billion with a share issue. At the end of last year was the Belgian-Dutch group € 13 billion of new shares for the takeover of ABN Amro, for which it paid € 24 billion. Lippens bases its concern on interviews with bankers. "Two months ago we knew not so bad that it is in America. And it will be much worse. We have a thick mattress needed for the next eighteen months to come when we can bring to ABN Amro. "
Two weeks ago reported the U.S. investment bank and adviser to Fortis Merrill Lynch certainly € 6.2 billion in additional capital was needed. The VEB yesterday demanded clarification of Fortis: CEO Jean-Paul Votron stopped in late april Fortis maintains that after the purchase of ABN Amro does not need on the capital market. In one year € 30 billion in market capitalization destroyed. After Votron last confession kelderde the share price by 19.4%, although yesterday climbed by 4.4% to € 10.65.
The massive unrest around the bank insurers, especially with our neighbours in Belgium as a bomb broken. While the fuss arose in the Netherlands to the limited financial world, it is with our neighbours the call of the day. Not only is the bank dominates the streetscape, but by the mokerslag for the Belgian volksaandeel are also hundreds of thousands of small investors hit hard.
All Belgian newspapers opened yesterday with real rampenkoppen, where the free fall of the bank insurers was wide coverage. 'Fortis crashes, "" Rampdag for Fortis' and' Fortis loses 5.3 billion, "opened three leading newspapers.
The panic around the group across the border so great that the national regulator CFBA has had reassuring words to speak to the desperate savers. "The emergency of Fortis is no reason to bank run and money to get off," said a CFBAwoordvoerder. "The bank complies with all legal requirements, but has itself just very sharp targets."
Maurice Lippens claims that all major shareholders yesterday "unanimously support" have pledged.
Like arrows in the Netherlands focus mainly on CEO Jean-Paul Votron, who are heavily vertild appears to have complied with the takeover of ABN Amro. But while the Netherlands in Brussels calling his bonus of € 2.5 million to be paid back in Belgium is demanding his departure.
Who makes such big mistakes, must bear the consequences and therefore resign, "said Huybregtse chairman of the Flemish federation of Investment and Investors. The fall of the share is for him a confirmation that the takeover of ABN Amro far too expensive and was poorly timed.
"The former shareholders of ABN Amro are now taking a bath in champagne", stressed Huybrechts. "Who makes major mistakes, must go. Fortis is a really volksaandeel and with confidence that you can not cope reckless. "
The Belgian newspaper the Standard is tough on the CEO: "The kredietcrisis has affected all banks, but it is no excuse. Fortis is much sharper fall, "says the commentator. "Fortis has always denied that there was still a capital increase. They were therefore either lies or ignorance. Both are equally bad, so must Votron the honour to itself. He is the only one who has earned something to the whole operation. "
According to Belgian media wanted Fortis announce Thursday that the bonus Votron would be removed, but this is at the last moment not yet happened. Also, all press speculation about his succession, with the name of Filip Dierckx.
Votron itself will of being firm. "The shareholders are behind me and also in the top of the group, I only support for this I have put in operation," said the under fire lying Fortis chief executive.
The refund of the now controversial bonus points he resolutely. "What I do with my money, my case. The bonus had nothing to do with ABN Amro, but was about the year 2007, "said Votron. The CEO is a willing part of his salary in Fortis documents.
Votron may also still rely entirely on chairman Lippens, who denies that the bank itself on the takeover of ABN Amro has completed. "Votron remains simply the CEO. At present intervention, which is difficult, that's really show leadership. "
Viet Nam, Taiwan and Pakistan face calls to boost investor confidence
Several Asian governments are looking at spending billions of dollars on shares to support plunging stock markets, in a move likely to be welcomed by global investors who fear emerging markets may be about to suffer further dramatic falls, the Financial Times (FT) reported.
The move follows a 13 per cent fall this year in the MSCI Asia Pacific Index, which looks as though it will end the month with its worst first-half performance since 1992, when it sank by 23 per cent as the Japanese economic bubble deflated, the FT said yesterday (June 30).
Government officials in Taipei, where the local market dropped to a five-month low last Friday, said the Cabinet had called on government pension and insurance funds to buy more domestic shares and to hold their investments for a longer period, said the paper.
Taiwan's economic and financial ministers and central bank officials met over the weekend to discuss how to boost investor confidence.
They stopped short, for now, of ordering the use of a NT$500 billion (US$16.47 billion) National Stabilisation Fund designed to support markets in times of volatility caused by non-economic events, said the paper. However, the board of the fund, which was last used during political turmoil after the 2004 presidential election, will meet again on Friday.
In Viet Nam, state media reported that the stock exchange and securities regulator was setting up a stabilisation fund to support a market that has lost nearly two-thirds of its value this year as inflation surged.
And in Pakistan, the Karachi Stock Exchange (KSE) is coming under increasing pressure to use a 30 billion rupee (US$438.7 million) stabilisation fund set up last week for use in 'volatile circumstances', said the FT.
Last year, Karachi had one of the hottest stock markets in the world, but its loss of nearly one-third in value since April has created 'systemic risk', the KSE said.
Official intervention to support share prices has a long history in Asia, said the FT. One of the most successful examples was in 1998, the paper added, when the Hong Kong government bought shares in the aftermath of the Asian financial crisis to support the value of the assets backing the territory's currency, which is pegged to the United States dollar.
Japan started to intervene in the stock market in 1991 after prices halved when the 'bubble economy' burst. Interventions continued for several years, but more than a decade later, the Nikkei average is worth only a third of its value in 1989, said the FT.
In Singapore, however, the government favours a 'hands-off' approach to stock market volatility and does not interfere to prop up the market.
Corn, Wheat Fall After U.S. Farmers Planted More Than Expected
By Jeff Wilson and Tony C. Dreibus
June 30 (Bloomberg) -- Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said U.S. farmers planted more of both crops than previously expected.
Corn was sowed on 87.3 million acres, up 1.9 percent from a March forecast, and spring-wheat planting jumped 6.8 percent to 14.197 million acres, the U.S. Department of Agriculture said in a report today. Corn prices doubled in the past year to a record on June 27, and wheat jumped 13 percent this month after reaching a record in February. The U.S. is the world's largest corn grower and wheat exporter.
``When prices get that high, you find every nook and cranny to plant on,'' said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas. ``This report sets a negative tone for the week.''
Corn futures for December delivery fell the CBOT's 30-cent limit, or 3.8 percent, to $7.57 a bushel, the biggest percentage drop since Jan. 23. The most-active contract reached a record $7.9925 on June 27. Corn is still up 26 percent this month, the biggest monthly gain since June 1988.
Wheat futures for September delivery fell 53.25 cents, or 5.8 percent, to $8.5875 a bushel in Chicago, the biggest drop since March 31. Futures have tumbled 36 percent from a record $13.495 a bushel on Feb. 27. The price is up 48 percent in the past 12 months after adverse weather curbed harvests in 2007.
Second-Biggest Crop
The corn planting exceeded the 85.2 million acres expected by 18 analysts surveyed by Bloomberg News. The acreage is the second-highest since 1944 after plantings last year surged to 93.6 million acres.
Corn growers increased seeding more than anticipated even after excessive rain in Iowa and Illinois, the largest producers of the grain, flooded fields and curbed yields, the USDA said. The report was based on a grower survey in the first two weeks of June and a special review last week of 1,200 farmers in Midwest areas ravaged by the worst floods since 1993.
``The number of acres farmers planted is larger than expected,'' said Greg Grow, a director of agribusiness for Archer Financial Services in Chicago. ``Now, the market will turn its attention to yields and growing conditions.''
After the close of trading, the USDA said in a separate report that the condition of the corn crop improved as sunshine and warmer weather dried some flooded fields. About 61 percent was considered good or excellent as of yesterday versus 59 percent a week earlier and 73 percent the prior year.
Drier Weather
Parts of the Midwest from Nebraska to Ohio got 25 percent of normal rain in the past week, allowing fields to drain and roots to push further into the soil, National Weather Service data show.
Corn also dropped today because U.S. inventories at the start of this month were larger than forecast, Grow said.
Stockpiles left over from last year's record harvest were 4.03 billion bushels as of June 1, up 14 percent from a year earlier, when supplies fell to a three-year low, USDA data showed. Analysts forecast 3.929 billion bushels, on average.
``Corn supplies are at least 100 million bushels higher than people expected,'' Grow said. ``This report indicates high prices are rationing demand.''
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, with soybeans in second place at $26.8 billion, government figures show. Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007.
Spring Wheat
Growers are expected to harvest 13.8 million acres of spring wheat in the year that started June 1, up from 12.9 million the prior year, the USDA report said.
U.S. farmers may seed 63.5 million acres with all varieties of wheat in the year that ends May 31, a 5 percent jump from the prior year, the government said. Production in the U.S. is expected to increase to 2.43 billion bushels, or 66.2 million metric tons, in the marketing year, up 18 percent from the prior year, the USDA said on June 10.
About 74 percent of the newly seeded spring-wheat crop was in good or excellent condition as of yesterday, compared with 72 percent last week and 79 percent a year earlier, the government estimated.
Inventories of U.S. wheat may more than double to 13.3 million tons by May 31, the government said. Global inventories are expected to increase to 132.1 million tons, up from 115.1 million the prior year, the USDA said.
Rio Wins 97% Ore Price Increase From Asia Steel Mills (Update2)
By Rebecca Keenan and Sungwoo Park
July 1 (Bloomberg) -- Rio Tinto Group, the world's second- largest iron ore exporter, won price rises of as much as 97 percent from Asian steelmakers, fueling inflation concern and adding pressure on BHP Billiton Ltd. to settle contracts.
The agreements for the 12 months that began April 1 match prices agreed on June 23 with Baosteel Group Corp., China's biggest mill, the London-based company said today in a statement.
Iron ore prices have gained almost fourfold since 2001 to a record, raising costs for mills such as South Korea's Posco and stoking inflation in Asia. BHP Billiton Ltd., the third-largest exporter of the ore, hasn't concluded price talks.
``BHP are holding out for an even higher price,'' said Peter Rudd, a Melbourne-based analyst at Carrol, Pike & Piercy Pty. ``I'd be looking for something a bit better for BHP.''
Rio rose as much as A$3.89, or 2.9 percent, to A$139.39 and was at A$137.70 at 12:48 p.m. Sydney time on the Australian stock exchange. BHP rose as much as 2.6 percent to A$44.84.
BHP hasn't yet settled iron ore prices, spokeswoman Samantha Evans said today by phone from Melbourne. Posco, Asia's third- biggest steelmaker, agreed to pay Rio as much as 97 percent more for iron ore this year, spokeswoman Ko Min Jin said today.
Posco fell as much as 0.6 percent in Seoul trading. Nippon Steel Corp., the world's second-biggest steelmaker, rose 1.4 percent to 583 yen at 9:36 a.m. on the Tokyo Stock Exchange, leading gains by other mills.
Japan Demand
Crude-steel demand in Japan, Asia's largest economy, will probably rise to an almost 35-year high this quarter, the government said yesterday. Nippon Steel last month raised contract prices of steel plate for domestic shipbuilders and machinery makers by about 40 percent to a record.
``These agreements are a strong endorsement of the settlement reached last week and reflect the very strong demand for our products across the world's fastest-growing markets,'' Sam Walsh, Rio's iron ore chief executive, said in the statement.
Rio is increasing production from its Pilbara operations in Western Australia to 320 million metric tons a year by 2012 and has a target beyond that of 420 million tons a year, the company said. It produced 145 million tons last year from the mines.
BHP, the world's largest mining company, said June 24 that the prices agreed by Rio are too small to cover extra shipping costs. Chinese mills, the world's largest consumers of the ore, will resist any attempt by BHP to win a larger price than agreed to with Rio, an official familiar with the talks said June 25.
The price rise won by Rio is higher than the 65 percent to 71 percent increase agreed to in February by Cia. Vale do Rio Doce, the world's biggest iron-ore producer.
Vale Return?
``Given Rio and BHP are both Australian suppliers, BHP is also likely to settle its iron ore deals at a similar level to Rio's,'' Lee Won Jae, a steel analyst with SK Securities Co., said from Seoul by phone. ``Of more concern to steelmakers is whether Vale comes back to ask for more.''
Central banks in Asia are battling to control price pressures, with Indonesia, India, Taiwan and the Philippines all raising interest rates in the past month. Energy and raw-material prices have risen too fast and inflation pressures were continuing to build, China's central bank said last month.
``Rising raw material prices including iron ore are directly fuelling concerns about inflation,'' said SK Securities' Lee, who couldn't rule out further increases by Posco in product prices. ``The impact is significant, with gains in steel prices pushing up costs for builders, automakers and other industries.''
Inflation in Korea will accelerate to the fastest pace in a decade, propelled by record fuel and food prices, the Bank of Korea said today. Slower growth is likely to prevent the Bank of Japan from raising its key interest rate from 0.5 percent this year, even as inflation runs at the fastest pace in a decade, according to economists surveyed by Bloomberg News. Inflation is being fueled in part by higher prices for steel.
Global economy may be close to a "tipping point" says the Bank for International Settlements - the banker for central banks
Jun 30, 2008
The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements (BIS) said on Monday.
In its 78th Annual Report released today, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."
"Over time, this could potentially even lead to deflation," it said.
The BIS said that while a severe slowdown is not inevitable, it believes that the risks of a sharp downturn are very real, and centered on the financial system. It warned that the process of cutting back on borrowing after many years of accumulating debt could lead to "much slower growth than is generally expected."
The bank says that the reduced availability of credit could force some financial institutions to sell assets at a time when buyers are hard to find - an outcome that could lead to another round of price declines and losses at banks. "The impact of such fire sales on prices, and on the capital of financial institutions, could be substantial," it said.
The BIS said that after a number of years of strong global growth, low inflation and stable financial markets, the situation deteriorated rapidly in the period under review. Most notable was the onset of turmoil in the US market for subprime mortgages, which rapidly affected many other financial markets and eventually called into question the adequacy of capital at a number of large US and European banks. At the same time, US growth slowed markedly, reflecting setbacks in the housing market, while global inflation rose significantly under the particular influence of higher commodity prices.
This sudden change in financial conditions was blamed by some on shortcomings in the extension of the long-standing originate-to-distribute model to new mortgage products in recent years. Others, however, noted that the sudden deterioration in both financial and macroeconomic conditions looked more like a typical "bust" after a credit "boom". The bank says several factors seem to support this second hypothesis: the previous rapid growth of global monetary and credit aggregates; an extended period of low real interest rates; the unusually high price of many assets (both financial and real); and the way in which spending patterns in different countries (the United States and China in particular) reflected their different stages of financial development (encouraging consumption and investment respectively).
The BIS says a disorderly decline in the dollar remains a possibility as losses on US assets pile up and the current-account deficit triggers ``a sudden rush for the exits."
A plunge in the currency may happen even after its ``remarkably orderly'' 14 percent slide against the euro in the past year, the Basel, Switzerland-based BIS said in an annual report today.
``Foreign investors in US dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency,'' the BIS said. ``While unlikely, indeed highly improbable for public-sector investors, a sudden rush for the exits cannot be ruled out completely.''
The fundamental cause of today’s problems in the global economy is excessive and imprudent credit growth over a long period, the BIS says. This always threatened two unwelcome outcomes: a rise in inflation and an accumulation of debt-related imbalances which would at some point prove to be unsustainable. In the event, both unwelcome phenomena are being experienced at the same time. Leaning against current inflationary pressures should imply a significantly less accommodating bias to global policy overall, even though this could create some short-run difficulties in some countries.
The BIS says it notes that the experience of the recent financial turmoil shows the need for a new macrofinancial stability framework to resist actively the inherent procyclicality of the financial system. This would require a primary focus on systemic issues and a much more countercyclical use of policy instruments (reducing the impact of a boom on the upswing of the business cycle). It also demands closer cooperation between the central banking and regulatory communities in trying to identify the build-up of systemic risks, deciding what to do to mitigate them, and agreeing in advance on steps that might be taken to manage periods of stress.
Speaking today, BIS General Manager Malcolm Knight noted that “central banks face a difficult dilemma because inflation pressures have come to the surface just when downside risks to growth have increased”. Moreover, important aspects of central bank functions have come under consideration, including how they provide liquidity to banks and their role in financial system oversight. “The BIS looks forward to working closely with both central banks and regulators in developing better analytical frameworks for addressing these important questions,” Knight added.
The 78th Annual Report was presented at the Bank’s Annual General Meeting held today in Basel, Switzerland, and chaired by Jean-Pierre Roth, Chairman of the BIS Board of Directors. Representatives from more than 130 central banks and international institutions attended.
PKR de facto leader Anwar Ibrahim today lodged a police report against police chief Musa Hassan and attorney-general Abdul Gani Patail over their alleged misconduct during his trials 10 years ago.
Anwar arrived at the Selangor state police headquarters in Shah Alam at about 2.50pm, accompanied by his lawyer Sankara Nair.Four of his party leaders, including vice president R Sivarasa and treasurer William Leong, had arrived much earlier at about 2.20pm and waited for Anwar to come to lodge the report.Outside the station, several other party leaders, including two of PKR's MPs N Gobalakrishnan and Yusmadi Yusoff, were disappointed that they weren't allowed into the station to accompany Anwar to make the report.
Even Anwar's daughter Nurul Izzah was not allowed into the station, creating some tension at the entrance. The police said that they would only allow five people in to lodge the report.
Some 30 supporters had also gathered outside the station.
After some 30 minutes, Anwar left the station - at about 3.20pm - to the PKR headquarters in Tropicana, Petaling Jaya where he is expected to hold a press conference.
Rally tonight
Anwar had earlier said that he had evidence implicating the inspector-general of police and AG in the misconduct, including fabrication of evidence in the cases launched against him after his sacking from government.He added that a fresh police report lodged against him for sodomy was a result of "interested parties to attack me in retaliation" over this evidence in his possession.The report alleging sodomy was filed by Anwar's aide, 23-year-old Mohd Saiful Bukhari Azlan, last Saturday.Anwar claimed that the fresh accusation against him was a "complete fabrication".Later tonight, PKR plans to hold a rally at the Stadium Melawati in Shah Alam, scheduled to kick off at 8.30pm.
20 comments:
HK market may not have seen bottom yet
Analysts expect more bad news this year
Nick Westra
June 30, 2008
The Hong Kong market has already surrendered most of last year’s gains in the first half and with concerns mounting about slowing overseas economies, market observers say the worst may be yet to come.
“We have many problems in front of us with the US market and Chinese market,” said Kingston Lin King-kam, an associate director at Prudential Brokerage.
“The third quarter may be a little bit better for the Hong Kong market, but after November, the market may keep on dropping,” Mr Lin said.
The Hang Seng Index has slumped 20.75 per cent or almost 6,000 points so far this year, including a bruising two-week decline in January when it fell more than 5,000 points. It ranks among the region’s worst-performing indices, having lost almost twice as much as Japan and South Korea.
Equity markets this year have turned into a punching bag for skittish investors fretting over the staggering United States economy, big shakeups on Wall Street, and record food and energy prices. And as if things were not bad enough, central bank officials in the US and Europe have hinted at a round of interest rate increases at the end of this year to beat back inflation levels.
The Hang Seng Index could fall below 20,000 points later this year if the Federal Reserve does increase its key interest rate, Mr Lin said.
“The global backdrop in the second half of this year is still going to be quite challenging,” said Khiem Do, the head of Asian multi-asset investment at Baring Asset Management. “But as far as the region is concerned, there may be some good news.”
Mainland inflation levels could slow to between 5 per cent and 7 per cent over the next few months as food prices, including pork costs, fall slightly, Mr Do said. And with cheaper valuation levels in Hong Kong following the first-half declines, the groundwork could be in place for a measured recovery in the market.
However, investor sentiment has soured so strongly it will take even more than that to sustain a rally.
“A significant correction in oil prices in the second half plus more friendly statements made by central banks, rather than their hawkish statements at the moment, would help the sentiment on stock markets and that could turn the market quite strongly,” Mr Do said.
“You need those drivers or catalysts to produce a turn because low valuations themselves cannot.”
A correction in energy prices would certainly boost oil-reliant companies, which have been devastated by the surge in costs.
China Petroleum and Chemical Corp (Sinopec) and PetroChina, the mainland’s largest oil refiners, have been among the worst performers on the Hang Seng Index this year, plummeting 37.61 and 27.77 per cent respectively.
In aviation, Cathay Pacific Airways has slumped 27.55 per cent as higher fuel costs squeezed margins.
Investors were not worried about oil prices during the bull market last year when the Hang Seng Index soared to a record 31,638.22 on October 30 with daily turnover routinely rising above HK$100 billion.
However, the market has since come crashing down and investors are trying to wait out the tough times. Trading levels have thinned as a result and may be unlikely to pick up again for some time.
Shares of Hong Kong Exchanges and Clearing, operator of the city’s stock exchange, have been battered this year as investors fear the trading slowdown will be reflected in the company’s bottom line.
After its shares almost doubled last year and paced gains in the Hang Seng Index, HKEx has been the index’s second-worst performer this year, plummeting 48.42 per cent.
Investors will search for key signs in the second half such as corporate earnings reports, trends in commodity prices, and monetary policy decisions to decide whether companies such as HKEx have already hit bottom or still have more room to fall.
However, some observers say with so many skeletons already out of the closet, the market has much more upside potential than downside.
“The market has already discounted a lot of negative potential news, including the local property market coming down, interest rates rising, and slowing earnings by Chinese companies,” said Steven Leung, a director of institutional sales at UOB Kay Hian.
“If all these start to be not true, then market sentiment could improve quite significantly.”
Jokes
A couple has returned from their honeymoon and it was obvious to everyone that they are not talking to each other. The groom's best man takes him aside and asks what's wrong.
"Well," replied the man "when we had finished making love on the first night, as I got up to go to the bathroom, I put a $50 bill on the pillow without thinking."
"Oh, you shouldn't worry about that too much," said his friend. "I'm sure your wife will get over it soon enough - she can't expect you to have been saving yourself all these years!"
The groom nodded gently and said, "I don't know if I can get over this though: She gave me $20 change!"
What we can do in this dangerous moment
By Lawrence Summers
June 30 2008
It is quite possible that we are now at the most dangerous moment since the American financial crisis began last August. Staggering increases in the prices of oil and other commodities have brought American consumer confidence to new lows and raised serious concerns about inflation, thereby limiting the capacity of monetary policy to respond to a financial sector which – judging by equity values – is at its weakest point since the crisis began. With housing values still falling and growing evidence that problems are spreading to the construction and consumer credit sectors, there is a possibility that a faltering economy damages the financial system, which weakens the economy further.
After a period of intense activity at the beginning of the year with the passage of fiscal stimulus legislation, strong action by the Federal Reserve to cut rates and provide liquidity and the introduction of anti-foreclosure legislation, policy has again fallen behind the curve. The only important policy actions of the past several months have been those forced on the Fed by the Bear Stearns crisis. It would be a mistake to overstate the extent to which policy can forestall the gathering storm. But the prospects for a more favourable outcome would be enhanced if four actions were taken promptly.
First, the much debated housing bill should be passed immediately by Congress and signed into law. It provides some support for mortgage debt reduction and strengthens the government’s hand in its troubled relationship with the government-sponsored enterprises – Fannie Mae and Freddie Mac. While it is an imperfect vehicle – too limited in the scope it provides for debt reduction, insufficiently aggressive in strengthening GSE regulation and failing to increase the leverage of homeowners in their negotiations with creditors through bankruptcy reform – it would contribute to the repair of the nation’s housing finance system. Failure to pass even this minimal measure would undermine confidence.
Second, Congress should move promptly to pass further fiscal measures to respond to our economic difficulties. The economy would be in a far worse state if fiscal stimulus had not come on line two months ago. The forecasting community is having increasing doubts about the fourth quarter of this year and beginning of the next as the impact of the current round of stimulus fades. With long-term unemployment at recession levels, there is a clear case for extending the duration of unemployment insurance benefits. There is now also a case for carefully designed support for infrastructure investment, as financial strains have distorted the municipal credit markets to the point where even the highest-quality municipal borrowers are, despite their tax advantage, paying more than the federal government to borrow. There are legitimate questions about how rapidly the impact of infrastructure spending will be felt. But with construction employment in free fall, there will be a need for stimulus tied to the needs of less educated male workers for quite some time. Fiscal stimulus measures must be coupled to budget process reform that provides reassurance that, once the crisis passes, the fiscal policy discipline of the 1990s will be re-established.
Third, policymakers need to make a clear commitment to addressing the non-monetary factors causing inflation concerns. Though this could change rapidly and vigilance is necessary, it does not now appear that there are embedded expectations of a continuing wage price spiral. Rather, the primary source of inflation concern is increases in the price of oil, food and other commodities. Even if structural measures to address these issues do not have an immediate impact on commodity prices, they may serve to address medium-term inflation expectations. Appropriate steps include reform of misguided ethanol subsidies that distort grain markets to minimal environmental benefit, allowing farm land now being conserved to be planted; measures to promote the use of natural gas; and reform of Strategic Petroleum Reserve Policy to encourage swaps at times when the market is indicating short supply. Major importance should be attached to encouraging the reduction or elimination of energy subsidies in the developing world.
Fourth, it needs to be recognised that in the months ahead there is the real possibility that significant financial institutions will encounter not just liquidity but solvency problems as the economy deteriorates and further writedowns prove necessary. Markets are anticipating further cuts in financial institution dividends; regulators should encourage this to happen sooner rather than later and more broadly to reduce stigma. They should also recognise that no one can afford to be too picky about the timing or source of capital infusions and rapidly complete the review of regulations that limit the ability of private equity capital to come into the banking system. Most important, regulators should do what is necessary, including possibly seeking new legislative authority, to assure that in the event of an institution becoming insolvent they can manage the resolution in a way that protects the system while also protecting taxpayers. It was fortunate that a natural merger partner was available when Bear Stearns failed – we may not be so lucky next time.
Unfortunately we are in an economic environment where we have more to fear than fear itself. But this is no excuse for fatalism. The policy choices made in the next few months will matter to the lives of millions of Americans, to America’s economic strength and to the global economy.
Geopolitical Diary: Oil, speculators and politics
Source: Stratfor.com
Author: Stratfor
27-06-2008
The US Congress held hearings on Monday on the role that speculators play in shaping the oil market, specifically, the role they play in driving prices up.
Like most commodities, oil can be purchased and sold not simply for immediate delivery, but for receipt at some point in the future. The issue of the day rests in this “futures” market.
Normally, most of the players in the futures markets are industry players - largely shippers and refiners - who simply are planning ahead. After all, why purchase crude oil at the last second and risk that none will be available when one can purchase a futures contract that will ensure delivery in, say, September? If August rolls around and it turns out you do not need all the crude you in effect pre-purchased, one can simply sell the extra futures contract and buy a new contract for October delivery. In essence, it’s the industrial equivalent of keeping a spare can of gasoline in your garage.
But there are other players in the futures markets, too: investors who have no intention of ever taking delivery of any shipment. Instead, they play the market in a bid to profit from price fluctuations. Such speculators used to be marginal players, but right now there are a lot of these folks. Some estimates put them at more than two-thirds of total traders by volume. Part of this jump is thanks to the subprime lending mess. When the mortgage market cracked in late 2007, many who made their living trading mortgage securities and property fled into the energy markets.
Defenders of speculation claim that anything that increases the number of participants will increase efficiencies and lower prices in the long run. Detractors of speculation assert that - as with any other market - when more money chases after a set amount of product, prices rise. And in this case, unnecessarily so.
Not to muddy the waters, but both are right, and wrong. The more market players there are, the less likely it is shocks will occur and the less severe those shocks will be. Large, deep markets tend to iron out disruptions due to sheer size. At the same time, when a large proportion of the market players do not actually ever intend to receive the product, the result is indeed a price overhang.
This raises two questions: how big of an overhang, and what to do about it?
Some of those testifying before Congress projected that without speculators the price of oil would fall by half in a month. While Stratfor certainly senses that speculators are having a demonstrable impact, we have a hard time believing the oil issue is that simple.
If Saudi Arabia makes good on its weekend pledge to increase oil output, global spare production capacity will slide to less than 1 million barrels per day, a historic low. Add in remarkably robust resilience from China and the United States and a price crash seems a stretch, even though a price moderation is certainly possible (and even likely) with the right mix of regulation. Oil is scarce, oil is needed, oil has no obvious substitutes, and there is nothing that anyone can do to bring more of the stuff onto the market quickly. That is a perfect storm for expensive crude, and no amount of regulatory change is going to alter this bottom line.
Yet some level of regulation is imminent for two reasons, one structural, the other political.
Structurally, speculators serve a crucial function under normal circumstances. When stock markets hit ridiculous highs, the exuberance of speculators overwhelms the system and quickly forces a market spike to become a market collapse (think the April 2000 dot-com crash). These collapses predominantly hurt only speculators and force some much-needed rationality into the system. But in strategic commodities such as oil or food, price spikes can wreak havoc on society.
And when that happens, regulators cut in. Regulation makes the system more inefficient, but so does out-of-control speculation. Unless it is very bad regulation, however, it does not stop the forces of supply and demand from functioning. A market with runaway speculation, on the other hand, can do that.
Politically, there is more going on here than simply crude going for more than US$130 a barrel, gasoline at US$4 a gallon, and a summer driving season only just under way. The United States is in full election mode, neither candidate has a vested interest in defending the status quo, and there are 300 million Americans out there who are getting fed up with prices that make the Hurricane Katrina aftermath look cheap.
Taking some sort of action on energy is a political no-brainer, and “speculators” are the perfect faceless foe. Congress and both presidential candidates are in the mood to act, and to act quickly.
The trick will be to hit the right balance, and that is no sure thing. If it were, it would have been done ages ago. Futures trading is an essential leg of energy markets, and finding a way to separate those not actually interested in getting hold of the black gooey stuff from those who do will not be simple.
Any regulation that fails to do just that won’t just hurt speculators, it will disrupt the global energy network. And if that were to happen, US$130 a barrel would look cheap indeed.
China fuel price hike may not sap demand
By ELAINE KURTENBACH
Jun 20, 2008
SHANGHAI, China (AP) -- Chinese motorists, long accustomed to cheap gas, seemed to take in stride a government decision to boost fuel prices Friday by as much as 18 percent.
"Maybe I might drive a bit less. But if it's for business, then if I have to drive, I will," said He Ping, a trading company employee who was refilling his VW Jetta at a Beijing gas station.
There were at least a dozen vehicles waiting behind him in line.
While higher prices for China's state-controlled fuel will inevitably squeeze consumers at both filling stations and grocery stores, analysts say it is unlikely to make an immediate or huge dent in the country's hunger for oil.
China's economy is booming, and people are buying cars and air conditioners as their incomes grow. There is huge pent up demand in a country of 1.3 billion, where per capita energy consumption remains far below western nations.
"It's still affordable," said a man who was filling up his car, who gave only his surname, Pan.
The 12.6 gallons of gas Pan bought cost him 318 yuan ($46). That's $3.65 a gallon.
The silver lining is that with the government increasing prices, refiners may finally boost production of gasoline, diesel and other refined products, helping to alleviate long lines at gas stations and a widespread fuel shortage.
Refiners have cut production because they were losing money on the wide gap between global crude oil prices and state-set retail prices. While the government paid billions in subsidies to China's two big state-owned refiners, many smaller refiners were shutting down.
"Do not expect an immediate fall in China's oil imports - the price effect on demand will work in China as well, but it will take some time to work through," Wang Tao, an economist for UBS Securities, said in a report issued Friday.
Crude oil prices Friday jumped more than $4 per barrel at one point on the New York Mercantile Exchange after tumbling the day before on news that China's National Development and Reform Commission would raise prices for gasoline and diesel fuel by 16 percent and 18 percent respectively.
Some analysts said the oil market may have overreacted to the news from China, with some traders buying oil futures on the belief that their climb will continue.
"Whether domestic demand cools, or the price increase simply serves to bring more refining capacity on-line to satisfy China's voracious appetite, remains to be seen," said Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co.
The government last hiked fuel prices by about 11 percent in November. It froze prices to avert further inflation, which has touched 12-year highs since the beginning of the year.
U.S. shares for Petrochina and Sinopec jumped Thursday when the price hikes were announced, but tumbled on Friday. Petrochina fell $6.51, or 4.6 percent, to $133.98, and Sinopec lost 5.2 percent, to trade at $39.81
The hike raised the price of gasoline by 1,000 yuan ($145) per ton to 6,980 yuan ($1,015) and diesel by the same amount per ton to 6,520 yuan ($949) per ton. Aviation kerosene rose by 1,500 yuan ($218) per ton to 7,450 yuan ($1,084), the commission, known as the NDRC, said on its Web site.
To protect individual consumers, the government said it would not allow any increases in bus and subway fares or taxi fares. Natural gas and liquefied petroleum gas prices will remain unchanged, and subsidies to the poor and to grain farmers would increase, it said.
Areas in Sichuan province, hit by a massive earthquake last month, were exempt from the increases, state media reported.
The government will pay nearly 20 billion yuan ($2.9 billion) in subsidies to help cushion the impact of the price hike, the official Xinhua News Agency reported.
Still, the move is widely expected to boost inflation - a major concern for Beijing.
China's inflation rate fell in May to 7.7 percent from 8.5 percent the month before, mainly reflecting lower food prices. But economists warn that higher costs for crude oil and other commodities pose a long-term threat.
Despite surging oil costs, China's imports of both crude oil and oil products have surged to unprecedented levels as it builds up national stockpiles, while exports have plunged. Crude oil imports rose to 59.8 million barrels in January-April, up 10 percent from a year earlier.
Gasoline imports skyrocketed by nearly 20 times to 554,000 tons in January-May while imports of diesel jumped by more than nine times, to 2.9 million tons.
Pinched by surging costs for labor, land and materials - as well as energy - Chinese industries are finally beginning to cut back.
China Ocean Shipping (Group) Co., a huge state-owned shipping company, announced earlier this week that it was cutting the speed of its ships by 10 percent to help reduce fuel consumption and conserve energy.
$2.1m for a buffet with Buffett
(China Daily/Agencies)
2008-06-30
It takes millions of dollars to have lunch with someone who controls billions.
A Chinese investment fund manager won the chance to have lunch with billionaire Warren Buffett by bidding $2.1 million in the most expensive charity auction on eBay.
Zhao Danyang, of Hong Kong-based Pure Heart China Growth Investment Fund, won the auction, which ended on Friday evening with a bid of $2,110,100.
A spokeswoman for the Glide Foundation, which receives the proceeds from the auction, identified Zhao as the winner on Saturday. The foundation is a non-profit organization in San Francisco's Tenderloin district that helps serve the poor and homeless people.
Zhao and up to seven friends will dine with Buffett, the 76-year-old chairman of Berkshire Hathaway Inc, at the Smith & Wollensky steakhouse in New York City whenever the two men can schedule it.
The five-day online auction ended on Friday night on eBay Inc's website. After starting at $25,000, a battle broke out between two bidders in the final stretch, with bid prices jumping seven-fold in two hours.
It is the most expensive charity bid in eBay history, topping the $2.1 million paid for a letter to radio talk show host Rush Limbaugh, a spokeswoman said.
"It almost feels like a miracle," Glide's founder Reverend Cecil Williams said. "We are amazed and ready to continue our work of breaking the cycle of poverty."
The investment philosophy Zhao's fund describes on its website is similar to Buffett's approach of finding companies with an enduring competitive advantage that are selling for significantly less than they are worth.
Chinese media reports said Zhao's Pure Heart is the first legal private investment company (usually called China version of hedge fund) in the country.
Zhao graduated from Xiamen University on the Chinese mainland as a system engineer, the Pure Heart website says. He went abroad in 1994, where he honed his investment skills in running industrial enterprises and trading.
He began his career in the securities business in 1996 and has more than 10 years' experience in asset management, and has managed overseas and domestic listed securities.
Zhao is one of the leading players in promoting the philosophy of "selecting securities investment from the view of an industrial investor".
Buffett has been auctioning off lunches online for six years but began auctioning the lunches for Glide off-line in 2000. He offers only one lunch a year.
A new wrinkle in Japan's porn boom
By William Sparrow
Jun 28, 2008
BANGKOK - Recent reports and a Time Magazine feature released last week have exposed that the fastest-growing niche genre within Japan's massive and multifaceted adult film industry is pornography for, and featuring, the elderly.
The market for elder porn - some have called it "Grandpa porn" - has doubled over the past decade, a producer of "mature-women" movies told Time, and the sector seems to be enjoying what could be called a "golden age". A recent Japanese population study found that by 2025, 27%, or 33.2 million people in Japan, will be aged over 60. It stands to reason, then, that the market for audiences - as well as actors - is growing. This fact has hardly been overlooked by adult film entrepreneurs in the highly competitive pornography market.
Studies suggest that elder porn - adult videos with "actors" sometimes in their 70s - appears poised to be the next big money maker for the billion-dollar Japanese porn sector. Over the past few years, some have estimated that thousands of productions using older - even senior - porn talent have been released in the domestic pornography market; some have begun seeping overseas.
Having an active sex life well into old age is perfectly normal. However, launching a new career as a septuagenarian porn star is odd, if not awe-inspiring. Take 74-year-old Shigeo Tokuda (his stage name) who in the 14 years since retirement has appeared in over 350 adult films such as Maniac Training of Lolitas (2004) and Forbidden Elderly Care (2006).
As Time reported last week, "The Shigeo Tokuda series he has just completed portray him as a tactful elderly gentleman who instructs women of different ages in the erotic arts, and he boasts a body of work far more impressive than most actors in their prime."
There is a unique audience within Tokuda's age group he believes: "Elderly people don't identify with school [aged-girl] dramas," he says, speaking of standard-issue Japanese porn. "It's easier for them to relate to older-men-and-daughters-in-law series, so they tend to watch adult videos with older people in them.
"People of my age generally have shame, so they are very hesitant to show their private parts," Tokuda said in his recent interview with Time. "But I am proud of myself doing something they cannot. That doesn't mean that I can tell them about my old-age pensioner job."
If Tokuda ever wants to talk shop with a like-minded artiste, he may have to go to Russia where 75-year-old David Bozdoganov has also become a porn legend. The story of Bozdoganov, as recounted on Ananova.com, began when the Russian wandered into a porn audition after mistaking posters for seeking "erotic actors" as advertisements for a muscleman show. The rest is X-rated history.
Although Bozdoganov went on to produce an oeuvre that includes The Old Neighbor and The Handyman at Work, he has experienced some generational issues. As the Russian website reported: "His female co-stars always complain because David believes in the beneficial power of garlic and insists on rubbing it on his erection before a scene and it's rather smelly."
In Japan, so-called mature productions aren't just attracting men. In recent years, there has been increasing use of female performers, some of whom have also been in their 70s. This is a bold development for an industry that traditionally labels women in their mid- to late-20s as "mature". Usually, only "title girls", or the extremely beautiful, can headline top-selling productions once they reach their mid-20s.
Trends suggest that elder porn, boosted by demographics and profit-minded producers, won't get old any time soon. The total revenue spent on pornography in Japan - in the form of videos, magazines, anime, hentai, manga and adult-oriented role play video games - was a staggering US$19.98 billion for the fiscal year 2006. The US, by comparison, spent $13.33 billion for the same period.
Profits aside, there may be some societal benefit form elder porn as well. Perhaps such "seasoned" performers may be able to jump-start Japan's sagging sexual activity rates. For example, the World Health Organization reported in March that 25% of married Japanese couples had not had sex in the last year, and that more than one in three married couples over 50 said they no longer had sex at all.
And although the elder sex set won't do much to boost Japan's declining birth rate, it may stimulate healthy, fulfilling lifestyles among what will soon be the world's oldest population.
As for veteran porn star Shigeo Tokuda, he told Time he plans to keep working until he's 80 - or older.
Japan's Nikkei falls for 8th day as investors brace for weak 'tankan' survey
June 30, 2008
TOKYO (AP) -- Japanese stocks stretched their losing streak to eight straight sessions Monday as a falling dollar hurt exporters and amid dire projections for a closely-watched business sentiment survey to be released Tuesday.
Reversing early gains, the benchmark Nikkei 225 stock average closed down 62.98 points, or 0.46 percent, at 13,481.38. The index has shed more than 900 points, or about 6 percent, this month.
Analysts predict that Bank of Japan's quarterly "tankan" survey will reflect growing corporate concerns about business conditions.
"High energy prices and increased uncertainty over the U.S. economy provide the major background to the weakness in sentiment," said UBS economist Akira Maekawa in a preview report.
A falling dollar added to the concerns, hurting exporters including automakers and electronics manufacturers.
Fuji Heavy Industries Ltd., maker of Subaru-brand cars, slid 4.6 percent to 520 yen. Toyota Motor Corp. Japan's largest automaker Toyota Motor Corp. retreated 1.2 percent to 5,010 yen, and Nissan Motor Co. ended down 1.5 percent at 877 yen.
Sony Corp. plunged 4.1 percent to 4,640 yen - its lowest level in almost two months.
Among gainers, issues in the oil and coal products sector strengthened after crude futures spiked to a record $142.99 a barrel in New York Friday.
Nippon Oil Corp. soared 7.4 percent to 713 yen, and Nippon Mining Holdings, Inc. jumped 3.6 percent to 665 yen.
Power companies also gained, with both The Tokyo Electric Power Co., Inc. and The Kansai Electric Power Co., Inc. both adding about 3.8 percent.
The broader Topix index of all First Section issues on the Tokyo Stock exchange fell 0.04 percent to 1,320.10.
In currency trading, the dollar fell to 105.28 yen by late afternoon, down from 106.14 Friday. The euro gained slightly against greenback to US$1.5797 compared with US$1.5794.
The dollar was mixed against other major Asian currencies. It fell to 1.3605 Singapore dollars and 30.3540 Taiwan dollars, while gaining to 44.7850 Philippine pesos.
What gold is telling us about global economy
By Noriko Hama
June 30, 2008
Look at these numbers: 21, 35 and 1,000. What kind of vital statistics would you say these were? The amount of calories you need to deny yourself to get back into shape? The number needed on your point card to earn the cash back you covet at your local supermarket?
Neither is, of course, the answer. All three figures represent the same thing, in fact. They are the price of an ounce of gold as calculated in U.S. dollars. The difference is in the timing. In the 1920s, $21 would buy you an ounce of gold. That was the official rate at which the U.S. Federal Reserve would trade gold with anyone who wished to make the transaction. From the mid 1930s to 1971, that official dollar-for-gold conversion rate was fixed at $35 per ounce.
Those fixed conversion rates were called the dollar's gold parity. Now the dollar no longer has a gold parity. The price of gold, just like any other commodity, is determined by the markets. And earlier this year, there was a point at which the market price for gold soared to $1,000 per ounce.
Up until the mid 1930s, most major currencies had gold parities. They were convertible to gold at that rate whenever anyone went along to the relevant central bank to request the exchange. This was the time of the international gold standard. It was a time of great currency stability, because by definition, foreign-exchange rates could not deviate very far from the fixed gold parities. Whenever that was liable to happen, gold would flow out of a country that had a depreciating currency, causing its economy to shrink. This was because the amount of money the country could create was linked directly to the amount of gold in its possession.
No gold, no money. No money, no growth. And where there is no growth, there are no imports. No imports means no trade deficit. No trade deficit means no currency depreciation. Thus, the exchange rate would slide back up toward the currency's gold parity, and everything would quiet down again. Stability would be restored.
Life was simple then, but at the same time very static. Since countries could not run trade deficits for very long, they were effectively prevented from living beyond their means. That made it very difficult for them to grow. This constraint on growth was the basic reason why the gold standard broke down. With Britain taking the lead, major nations began to go off the gold standard in the 1930s, triggering of an exchange-rate war, the severity of which was well documented in many an academic study.
Some seventy years on from those currency warfare days, and thirty-odd years from August 1971, when the United States finally went off the gold standard, suggestions are now being made that maybe it's time to revive the international gold standard so that the extreme currency instability of these recent months and weeks can be put to rest. The very fact that gold is being so highly priced by the markets, proponents claim, is a sign that the world is ready for the revival of gold parities among nations.
The suggestion has its merits. Perhaps the global economy could do with a dose of the extreme discipline the gold standard imposes. For the prime feature of the global economy is that it has absolutely no discipline whatsoever.
Yet discipline will come at a price. The global economy would suffer a severe shrinkage. But then again, such a shrinkage might come anyway if the economics of greed maintains its current pace, gold standard or no. We live in dangerous times.
Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.
Global stock markets keep grinding lower
By Carter Dougherty
June 30, 2008
FRANKFURT: As the United States markets edge toward bear territory, losing nearly 20 percent of their value from last fall's peak, investors might wonder where they can turn for relief.
The gloomy answer: nowhere.
Many of the major markets in Europe and around the world have already entered a bear market. Germany and France are among the markets suffering the most, and once high-flying emerging markets in countries like China and India have collapsed even more drastically.
Higher inflation, exploding energy costs, troubled credit markets and worries about an inflationary psychology, it turns out, are global concerns. And fixing these problems — and bringing optimism back to stock markets worldwide — is proving to be difficult for central bankers, who are trying to contain inflation without risking even slower growth.
"The recent downturn in equities is essentially about investors worrying that central banks are going to be tougher than anyone had expected," said Erik Nielsen, chief Europe economist at Goldman Sachs.
The market numbers are uniformly grim.
In Europe's largest economy, Germany, the benchmark DAX index is off slightly more than 20 percent this year, and the CAC-40 in France is down almost 22 percent. The Euro Stoxx 50, a gauge for the 15-nation euro zone, has declined by about 24 percent. The nearly 15 percent decline in the FTSE 100 in Britain looks tame by comparison.
Emerging market indexes have fared even worse. The Hang Seng in Hong Kong has plunged nearly 21 percent, the Shanghai Composite has lost nearly half its value this year. The Bombay 500 in India lost about 38 percent.
The declines at major stock markets worldwide suggest that the same economic concerns are in play: rising inflation, which has been caused for the most part by record oil prices. U.S. crude oil futures hit a new high of $142.99 a barrel on Friday.
And central banks around the world, including the United States, are indeed moving to head off resurgent inflation by raising interest rates. While such a move can contain inflation, it can also squelch growth. Indeed, the likelihood of higher interest rates has already been fueling the market sell-offs as investors around the world try to digest all manner of bad economic news.
In Australia, inflation is running near its highest level in 16 years, and in March the central bank raised the benchmark lending rate to a 12-year high. The People's Bank, China's central bank, tightened credit again this month by raising banks' reserve requirements for a second time. China is struggling to control inflation without hurting its fast-growing economy; the same story is playing out in Indonesia and India.
On Sunday, the world's top central bankers began a two-day meeting in Basel, Switzerland, where they were considering approaches to calm nerves about inflation while avoiding a shock to economic growth. The United States is near or in recession, while growth is fading in Europe.
On Thursday, the European Central Bank may take matters into its own hands. In all likelihood it will raise its benchmark interest rate by a quarter percentage point, to 4.25 percent, hoping to curb inflation of both food and energy prices. Prices in the 15-nation euro area rose by 3.7 percent in the year through May, nearly double the bank's informal goal of just below 2 percent.
The Federal Reserve appears poised to follow suit. Last week the central bank voted to hold the short-term federal funds rate steady at 2 percent, ending a series of rate cuts. But it also hinted strongly that worries about inflation might compel it to raise the rate later this year. The rate affects what consumers pay for mortgages, car loans and other credit.
"Europe tends to paint this in black and white," said Ethan Harris, chief United States economist at Lehman Brothers in New York. "In the U.S., the balancing act is going on."
The absence of a unified global strategy for calming inflation has not been lost on investors who are searching for an anchor of stability, and coming up short.
"When you have central banks around the world doing different things — following a different road map — that can be problematic," said Quincy Krosby, chief investment strategist at The Hartford, a financial services firm.
Then there is the politics.
The European Central Bank's decision to get out in front is being debated in Europe, where growth is cooling under the pressure of oil prices, the strong euro, and fading demand in the United States. The bank's primary mandate is to keep inflation low, but that does not stop European politicians from worrying about growth.
Oil prices, while an enormous factor in the decision-making that will go on this week in Europe, are only part of the calculation. A more generalized inflation, feeding through to consumer prices and influencing demands for higher paychecks, also deprives businesses of the confidence that they had until recently about how to make decisions on building factories, hiring employees or developing products.
"The longer inflation remains high, the more damaging it will be for longer-term economic growth prospects," Morgan Stanley wrote in a report about inflation creeping upwards worldwide. "High inflation rates usually go hand-in-hand with a higher variability of inflation, which raises uncertainty and can thus reduce investment spending."
Stock market volatility caused by inflation worries has also complicated the pressing task of recapitalizing banking systems, above all in the United States but also in Europe.
As equity markets crumble, much-needed recapitalizations "become more and more difficult" because investor appetite for new sales of shares declines, Mario Draghi, the Italian central bank chief, who heads global efforts to reform financial regulation, said last week. Efforts to overcome the credit squeeze, in other words, have become hostage to the economic slowdown that the squeeze helped create.
Two company cases show what Chinese regulators didn’t know about how execs exercised their option, and how rich it made them.
By Wen Xiu
2008-06-30
Case I – China Mobile
China Mobile launched a stock option incentives program in 1997. Initially, options were awarded to the company chairman and senior executives, but later more options were offered to executives at company branches.
Company President Wang Jianyu was awarded options for 600,000 shares in December 2004, and received even more the following year. At present, Wang’s nominal annual salary is about HK＄ 5.05 million. But that does not include his options for 970,000 shares, which excludes the 40,000 options Wang exercised in 2007 and 85,000 in 2006. Thus, Wang is entitled to nominal earnings of more than HK＄ 105 million, and net earnings of more than HK＄ 73 million after deducting options costs.
Likewise, five other China Mobile senior executives and board directors are altogether entitled to 780,000 stock options, leading to potential net earnings totaling HK＄ 60 million. China Mobile gave these awards to another six directors in March 1998, but none exercised the rights.
Two directors surnamed Shi and Chen exercised their rights for stock options in April 1999 as they departed the company, netting HK＄ 22.27 million. A year later, former deputy chairman Li Ping exercised his options – with a corresponding market value totaling HK＄ 224 million – before he left his post. They earned him HK＄ 147 million.
In 2001, senior executives and directors did not exercise their stock options. But an unidentified number of employees exercised their rights to stock with a market value of 295 million yuan.
At the annual general meeting for shareholders in June 2002, China Mobile abolished the stock option program and replaced it with a new program effective for 10 years. Likewise, other state-owned enterprises listed in Hong Kong revised their stock-related incentive plans that same year.
The new China Mobile program is being applied to a broader range of employees and includes a shorter stock option lock-up period with few or no restraints. China Mobile said the board may take the liberty of inviting anyone from senior management and a core talent pool from all subsidiaries to claim stock options. Also, up to 40 percent of stock options granted in 2004 could be exercised within one year, while 30 percent could be exercised in the third and fourth years.
Data showed that, from 2004 to ’07, more than a dozen large stock options were exercised. These included six occurrences in 2006 and ’07. Total earnings from these deals reached HK＄ 10.8 billion.
Case II – COSCO
In May, COSCO Investment (Singapore) Limited Co. President Ji Haisheng was told by his superior that he should file a report pertaining to stock options among senior executives. COSCO is in the marine shipping business and lists on the Singapore Stock Exchange. It is 53 percent owned by COSCO Holding, a subsidiary of the state-owned enterprise China Ocean Shipping Group Co. (COSCO).
On the back of rising stock prices throughout 2007, Ji and other senior executives exercised their stock options. Their moves, however, did not meet with a state policy to tighten up the use of stock option incentives at state-owned companies.
However, since COSCO updated its stock option program, the company has made aggressive moves. For example, non-executive board members were allowed to claim stock options after serving just one year. Also, the chairman and president were given no limits for stock option entitlements. In addition, selected senior executives enjoyed multiple shareholding-related incentives from several listed subsidiaries.
COSCO worked out a stock option incentive plan as early as 2002. By the end of 2007, the company had awarded its board members a total 38.8 million stock options. Among these, 28.9 million stock options, or 70 percent, had been exercised.
Even after the State-owned Assets Supervision and Administration Commission (SASAC) ordered overseas listed companies to strictly regulate their stock options, COSCO officials showed no sign of slowing their incentive program.
Ji said in a phone interview, “COSCO Investment, as it is listed in Singapore, should abide by local rules and regulations.” He said he did not understand many of the SASAC regulations and was awaiting further explanation from the authority.
As Ji sees it, his contribution to the company over the past five years proves he is entitled to the stock options. “COSCO Investment made miracles in Singapore because our share value grew from less than SG＄ 100 million to today’s SG＄ 10 billion,” Ji boasted. “Singaporean media call me ‘superstar’ because I created numerous millionaires, even billionaires.”
On April 10, COSCO announced a new contract worth US＄ 292 million, but also canceled a separate order worth US＄ 202 million. In what seems a coincidence, company CFO Teo Chuan Teck later resigned due to “personal reasons.”
A source with knowledge of the matter said many contract orders that COSCO released were only memorandums that could be canceled without informing the public.
Investors reacted quickly. The company’s stock price slumped 15 percent, posting its biggest loss in company history.
Another controversy stems from the multiple incentives for senior executives. For example, Wei Jiafu, president of the parent company COSCO Group, can benefit from increased stock values tied to at least four listed subsidiaries. This is on top of the stock options he already possesses. In the same boat are company Deputy President Li Jianhong and business department chief Sun Yueying.
1 yuan = 14 U.S. cents
BIS points finger at easy credit
30 June 2008
RTÉ Ireland
The world's top central banking body has said the world economy could be in for an unexpectedly severe downturn. The Bank for International Settlements blamed lax credit for fuelling the current financial crisis.
The bank, known as the central bankers' central bank, suggested that interest rates should tend towards vigilance even in good times in order to discourage excessive borrowing.
While it was difficult to predict the severity of a downturn, it appeared that a 'deeper and more protracted global downturn than the consensus view seems to expect' was on the way, the BIS said.
It dampened hopes that booming emerging markets would offset the slowdown, saying that many of these markets were significantly dependent on external demand, notably from the world's largest economy the US.
The BIS argued that the sub-prime mortgage market - loans given to borrowers with poor credit ratings - was not a root cause of the turmoil on financial markets, but only a trigger.
The bank said years of cheap borrowing had led to an extraordinary accumulation of debt. It pointed out that in the US, the ratio of household savings to disposable income was about 7.5% in 1992. The ratio fell sharply in the early 2000s. By 2005, it had plunged to almost zero.
As Bill Evolves, Mortgage Debt Is Snowballing
By VIKAS BAJAJ
June 29, 2008
When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen.
More than three million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.
Those stark numbers not only illustrate the challenges for the lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble — the Congressional Budget Office estimates it would be used by 400,000 borrowers — and would do little to bolster the housing market.
“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of people who will be helped “is going to be overwhelmed by the three million that are headed toward default.”
Last week, the Senate voted overwhelmingly to advance the bill, and the House passed a version last month. Because of procedural delays in ironing out differences between the two houses, the Senate is not expected to pass the bill until after the Fourth of July recess.
The bill would let lenders and borrowers refinance troubled mortgages into more affordable 30-year fixed-rate loans that are backed by the government. Democratic leaders say Congress could send something to the president next month.
The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed.
“The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes,” President Bush said on Thursday.
Representative Barney Frank, Democrat of Massachusetts and a central force behind the legislation, said on Friday that recent reports about falling home prices have rallied support for the plan. But he acknowledged that the plan may not do enough to help homeowners or the housing market. Mr. Frank, chairman of the House Financial Services Committee, said that even after a bill like this, “you may need more.”
Other proposals that have been floated in Washington include expanding the current plan to make it mandatory instead of voluntary for certain home loans; having the government buy loans outright from lenders; and providing some way and some incentives to let homeowners become renters in their own homes.
But not everyone supports government interventions. Some Republicans, like Senators Jim DeMint of South Carolina and Jim Bunning of Kentucky, say the proposal would use government subsidies to bail out reckless lenders and borrowers. They suggest that the housing market will correct itself more quickly if Congress does not intervene.
The biggest impediment to helping homeowners is the weak economy. In addition to falling home prices and risky loans, homeowners are now confronting a tough job market. The unemployment rate has risen to 5.5 percent, up from 4.9 percent in January.
Mortgage rates have also been climbing. An estimated nine million homeowners owe more than their homes are worth and could find themselves with few options if they lose their jobs or if their mortgage bills rise substantially.
To take part in the proposed program, lenders would have to lower each debt obligation to 85 percent of the home’s current value. Borrowers would stay in their homes but would have to pay a 1.5 percent annual insurance premium. If homes’ values grow and borrowers sell or refinance, they would have to share the gain with the government.
The program would be managed by the Federal Housing Administration and paid for by the insurance premium, as well as a 3 percent fee paid by lenders and a tax on Fannie Mae and Freddie Mac, the government-sponsored buyers of mortgages. (The refinance proposal is part of a broader housing bill that would also overhaul laws relating to the two companies and the F.H.A.)
To qualify, borrowers would have to be in enough trouble that they could not afford their current mortgage payments but financially strong enough to make payments on their new loans.
“No matter how you fiddle with terms of their present situation, it’s not going to save the day” for many borrowers, said Bert Ely, a housing finance consultant based in Washington. “They are not in a good financial situation because they have lost their jobs and they are overburdened with credit cards and home equity loans.”
The effectiveness of the bill will depend to some extent on how it is handled by the F.H.A., an agency created during the Great Depression to insure home loans. It will have several challenges: persuading the lenders who made second mortgages and home equity loans to cooperate; screening loans to make sure borrowers have a good shot at keeping their homes after refinancing; and weeding out those trying to take advantage of the system.
Second mortgages and home equity loans were popular during the housing boom and often allowed Americans to buy a home with little or no money down or let them take out cash against their homes as prices rose. Now, home values have fallen so much that there is little or nothing left to pay off these loans when homes are sold or repossessed. The Congressional Budget Office estimates that about 40 percent of riskier mortgages made in recent years are coupled with such secondary loans.
Under the Congressional plan, these loans would have to be eliminated before homes could be refinanced. People who negotiate loan modifications say holders of second loans have been reluctant to take losses, and lenders with first loans are often unwilling to give them enough money to secure their cooperation. Under the Senate version of the plan, the F.H.A. would have some leeway in negotiating with borrowers who have second loans.
Another challenge for the F.H.A. would be selecting borrowers who have the best chance of paying off new loans. The agency would have to make sure lenders are not unloading only their worst loans, and lenders and the F.H.A. would have to guard against borrowers who can pay their current loans but would like a cheaper, government-backed loan.
Even if the agency insures hundreds of thousands of new mortgages, analysts do not expect the tide of foreclosures to ebb until the economy improves markedly. Mr. Zandi and others forecast that two million to three million mortgages will default — beyond the three million in trouble now — and economists at Lehman Brothers say home prices nationally may drop 15 percent by the end of 2009. That may force policy makers to consider further interventions.
“In this rush to legislate and with the lack of discussion of a lot of issues, people will look at this bill in the winter and say we shouldn’t have done this, we shouldn’t have done that,” said Mr. Ely, who closely followed the savings and loan debacle. “The politics are going to be so different come next year. There will be another administration, and who knows what the makeup of the House and Senate will be.”
There is a precedent for such government endeavors, but not since the New Deal. In the 1930s, the government created the Home Owners Loan Corporation to buy mortgages and modify them. In three years, it bought a fifth of the country’s home loans, said Alex J. Pollock, a resident fellow at the American Enterprise Institute in Washington.
“We won’t need to do anything of that magnitude here,” he said.
An official for the Mortgage Bankers Association, a trade group in Washington, acknowledged that the proposal may not help the majority of troubled borrowers, but said it would be a good start and would help restore confidence in the financial markets and the economy.
“There is no silver bullet,” said the official, Steve O’Connor, a senior vice president of the association. “There is no single solution to the housing crisis. It will take multiple tools to turn the housing market around, and it’s going to take time.”
Anwar: Officials faked sodomy evidence
June 30, 2008
(CNN) -- Malaysian opposition leader Anwar Ibrahim came out of hiding Monday, and says he has damaging evidence that proves senior members of the government faked evidence for sodomy charges against him.
"I have new evidence about the fabrication of evidence against me in 1998," Anwar told CNN Monday. "I totally reject these malicious attacks."
Anwar was the heir apparent to former premier Mahathir Mohamad until 1998, when he was sacked and charged for corruption and sodomy.
The sodomy conviction was overturned, but the corruption verdict was never lifted, barring him from running for political post until this year.
In the CNN interview, Anwar rejected the sodomy charges and also said he had evidence of threats on his life that caused him to go into hiding at the Turkish embassy in Kuala Lumpur.
CNN could not immediately reach members of Malaysia's ruling party.
The ruling party, National Front Coalition, has lead Malaysia since the country declared independence in 1957. Anwar's opposition party has gradually chipped away at the National Front's power.
Recently Malaysian police have said they are investigating a new sodomy charge against him, Anwar said.
The new charges were also false and were fabricated to usurp his political gains, Anwar said.
"I will challenge these attacks on every ground," Anwar said.
U.S. 'meltdown' reason geldinjectie Fortis
28 Jun 08
BRUSSELS / AMSTERDAM (DFT) - Fortis expects within the next few days to weeks to complete the collapse of the U.S. financial markets. That explains the bank insurers interventions of the series Thursday at dealing with € 8 billion. "We are ready at the last minute. It goes in the United States much worse than thought, "said Fortis chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies of 6000 U.S. banks that now lack coverage. "But Citigroup, General Motors, there begins a complete meltdown in the U.S.."
Fortis took yesterday € 1.5 billion with a share issue. At the end of last year was the Belgian-Dutch group € 13 billion of new shares for the takeover of ABN Amro, for which it paid € 24 billion. Lippens bases its concern on interviews with bankers. "Two months ago we knew not so bad that it is in America. And it will be much worse. We have a thick mattress needed for the next eighteen months to come when we can bring to ABN Amro. "
Two weeks ago reported the U.S. investment bank and adviser to Fortis Merrill Lynch certainly € 6.2 billion in additional capital was needed. The VEB yesterday demanded clarification of Fortis: CEO Jean-Paul Votron stopped in late april Fortis maintains that after the purchase of ABN Amro does not need on the capital market. In one year € 30 billion in market capitalization destroyed. After Votron last confession kelderde the share price by 19.4%, although yesterday climbed by 4.4% to € 10.65.
The massive unrest around the bank insurers, especially with our neighbours in Belgium as a bomb broken. While the fuss arose in the Netherlands to the limited financial world, it is with our neighbours the call of the day. Not only is the bank dominates the streetscape, but by the mokerslag for the Belgian volksaandeel are also hundreds of thousands of small investors hit hard.
All Belgian newspapers opened yesterday with real rampenkoppen, where the free fall of the bank insurers was wide coverage. 'Fortis crashes, "" Rampdag for Fortis' and' Fortis loses 5.3 billion, "opened three leading newspapers.
The panic around the group across the border so great that the national regulator CFBA has had reassuring words to speak to the desperate savers. "The emergency of Fortis is no reason to bank run and money to get off," said a CFBAwoordvoerder. "The bank complies with all legal requirements, but has itself just very sharp targets."
Maurice Lippens claims that all major shareholders yesterday "unanimously support" have pledged.
Like arrows in the Netherlands focus mainly on CEO Jean-Paul Votron, who are heavily vertild appears to have complied with the takeover of ABN Amro. But while the Netherlands in Brussels calling his bonus of € 2.5 million to be paid back in Belgium is demanding his departure.
Who makes such big mistakes, must bear the consequences and therefore resign, "said Huybregtse chairman of the Flemish federation of Investment and Investors. The fall of the share is for him a confirmation that the takeover of ABN Amro far too expensive and was poorly timed.
"The former shareholders of ABN Amro are now taking a bath in champagne", stressed Huybrechts. "Who makes major mistakes, must go. Fortis is a really volksaandeel and with confidence that you can not cope reckless. "
The Belgian newspaper the Standard is tough on the CEO: "The kredietcrisis has affected all banks, but it is no excuse. Fortis is much sharper fall, "says the commentator. "Fortis has always denied that there was still a capital increase. They were therefore either lies or ignorance. Both are equally bad, so must Votron the honour to itself. He is the only one who has earned something to the whole operation. "
According to Belgian media wanted Fortis announce Thursday that the bonus Votron would be removed, but this is at the last moment not yet happened. Also, all press speculation about his succession, with the name of Filip Dierckx.
Votron itself will of being firm. "The shareholders are behind me and also in the top of the group, I only support for this I have put in operation," said the under fire lying Fortis chief executive.
The refund of the now controversial bonus points he resolutely. "What I do with my money, my case. The bonus had nothing to do with ABN Amro, but was about the year 2007, "said Votron. The CEO is a willing part of his salary in Fortis documents.
Votron may also still rely entirely on chairman Lippens, who denies that the bank itself on the takeover of ABN Amro has completed. "Votron remains simply the CEO. At present intervention, which is difficult, that's really show leadership. "
Asian govts may intervene to prop up markets
July 01, 2008
Viet Nam, Taiwan and Pakistan face calls to boost investor confidence
Several Asian governments are looking at spending billions of dollars on shares to support plunging stock markets, in a move likely to be welcomed by global investors who fear emerging markets may be about to suffer further dramatic falls, the Financial Times (FT) reported.
The move follows a 13 per cent fall this year in the MSCI Asia Pacific Index, which looks as though it will end the month with its worst first-half performance since 1992, when it sank by 23 per cent as the Japanese economic bubble deflated, the FT said yesterday (June 30).
Government officials in Taipei, where the local market dropped to a five-month low last Friday, said the Cabinet had called on government pension and insurance funds to buy more domestic shares and to hold their investments for a longer period, said the paper.
Taiwan's economic and financial ministers and central bank officials met over the weekend to discuss how to boost investor confidence.
They stopped short, for now, of ordering the use of a NT$500 billion (US$16.47 billion) National Stabilisation Fund designed to support markets in times of volatility caused by non-economic events, said the paper. However, the board of the fund, which was last used during political turmoil after the 2004 presidential election, will meet again on Friday.
In Viet Nam, state media reported that the stock exchange and securities regulator was setting up a stabilisation fund to support a market that has lost nearly two-thirds of its value this year as inflation surged.
And in Pakistan, the Karachi Stock Exchange (KSE) is coming under increasing pressure to use a 30 billion rupee (US$438.7 million) stabilisation fund set up last week for use in 'volatile circumstances', said the FT.
Last year, Karachi had one of the hottest stock markets in the world, but its loss of nearly one-third in value since April has created 'systemic risk', the KSE said.
Official intervention to support share prices has a long history in Asia, said the FT. One of the most successful examples was in 1998, the paper added, when the Hong Kong government bought shares in the aftermath of the Asian financial crisis to support the value of the assets backing the territory's currency, which is pegged to the United States dollar.
Japan started to intervene in the stock market in 1991 after prices halved when the 'bubble economy' burst. Interventions continued for several years, but more than a decade later, the Nikkei average is worth only a third of its value in 1989, said the FT.
In Singapore, however, the government favours a 'hands-off' approach to stock market volatility and does not interfere to prop up the market.
Corn, Wheat Fall After U.S. Farmers Planted More Than Expected
By Jeff Wilson and Tony C. Dreibus
June 30 (Bloomberg) -- Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said U.S. farmers planted more of both crops than previously expected.
Corn was sowed on 87.3 million acres, up 1.9 percent from a March forecast, and spring-wheat planting jumped 6.8 percent to 14.197 million acres, the U.S. Department of Agriculture said in a report today. Corn prices doubled in the past year to a record on June 27, and wheat jumped 13 percent this month after reaching a record in February. The U.S. is the world's largest corn grower and wheat exporter.
``When prices get that high, you find every nook and cranny to plant on,'' said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas. ``This report sets a negative tone for the week.''
Corn futures for December delivery fell the CBOT's 30-cent limit, or 3.8 percent, to $7.57 a bushel, the biggest percentage drop since Jan. 23. The most-active contract reached a record $7.9925 on June 27. Corn is still up 26 percent this month, the biggest monthly gain since June 1988.
Wheat futures for September delivery fell 53.25 cents, or 5.8 percent, to $8.5875 a bushel in Chicago, the biggest drop since March 31. Futures have tumbled 36 percent from a record $13.495 a bushel on Feb. 27. The price is up 48 percent in the past 12 months after adverse weather curbed harvests in 2007.
Second-Biggest Crop
The corn planting exceeded the 85.2 million acres expected by 18 analysts surveyed by Bloomberg News. The acreage is the second-highest since 1944 after plantings last year surged to 93.6 million acres.
Corn growers increased seeding more than anticipated even after excessive rain in Iowa and Illinois, the largest producers of the grain, flooded fields and curbed yields, the USDA said. The report was based on a grower survey in the first two weeks of June and a special review last week of 1,200 farmers in Midwest areas ravaged by the worst floods since 1993.
``The number of acres farmers planted is larger than expected,'' said Greg Grow, a director of agribusiness for Archer Financial Services in Chicago. ``Now, the market will turn its attention to yields and growing conditions.''
After the close of trading, the USDA said in a separate report that the condition of the corn crop improved as sunshine and warmer weather dried some flooded fields. About 61 percent was considered good or excellent as of yesterday versus 59 percent a week earlier and 73 percent the prior year.
Drier Weather
Parts of the Midwest from Nebraska to Ohio got 25 percent of normal rain in the past week, allowing fields to drain and roots to push further into the soil, National Weather Service data show.
Corn also dropped today because U.S. inventories at the start of this month were larger than forecast, Grow said.
Stockpiles left over from last year's record harvest were 4.03 billion bushels as of June 1, up 14 percent from a year earlier, when supplies fell to a three-year low, USDA data showed. Analysts forecast 3.929 billion bushels, on average.
``Corn supplies are at least 100 million bushels higher than people expected,'' Grow said. ``This report indicates high prices are rationing demand.''
Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, with soybeans in second place at $26.8 billion, government figures show. Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007.
Spring Wheat
Growers are expected to harvest 13.8 million acres of spring wheat in the year that started June 1, up from 12.9 million the prior year, the USDA report said.
U.S. farmers may seed 63.5 million acres with all varieties of wheat in the year that ends May 31, a 5 percent jump from the prior year, the government said. Production in the U.S. is expected to increase to 2.43 billion bushels, or 66.2 million metric tons, in the marketing year, up 18 percent from the prior year, the USDA said on June 10.
About 74 percent of the newly seeded spring-wheat crop was in good or excellent condition as of yesterday, compared with 72 percent last week and 79 percent a year earlier, the government estimated.
Inventories of U.S. wheat may more than double to 13.3 million tons by May 31, the government said. Global inventories are expected to increase to 132.1 million tons, up from 115.1 million the prior year, the USDA said.
Rio Wins 97% Ore Price Increase From Asia Steel Mills (Update2)
By Rebecca Keenan and Sungwoo Park
July 1 (Bloomberg) -- Rio Tinto Group, the world's second- largest iron ore exporter, won price rises of as much as 97 percent from Asian steelmakers, fueling inflation concern and adding pressure on BHP Billiton Ltd. to settle contracts.
The agreements for the 12 months that began April 1 match prices agreed on June 23 with Baosteel Group Corp., China's biggest mill, the London-based company said today in a statement.
Iron ore prices have gained almost fourfold since 2001 to a record, raising costs for mills such as South Korea's Posco and stoking inflation in Asia. BHP Billiton Ltd., the third-largest exporter of the ore, hasn't concluded price talks.
``BHP are holding out for an even higher price,'' said Peter Rudd, a Melbourne-based analyst at Carrol, Pike & Piercy Pty. ``I'd be looking for something a bit better for BHP.''
Rio rose as much as A$3.89, or 2.9 percent, to A$139.39 and was at A$137.70 at 12:48 p.m. Sydney time on the Australian stock exchange. BHP rose as much as 2.6 percent to A$44.84.
BHP hasn't yet settled iron ore prices, spokeswoman Samantha Evans said today by phone from Melbourne. Posco, Asia's third- biggest steelmaker, agreed to pay Rio as much as 97 percent more for iron ore this year, spokeswoman Ko Min Jin said today.
Posco fell as much as 0.6 percent in Seoul trading. Nippon Steel Corp., the world's second-biggest steelmaker, rose 1.4 percent to 583 yen at 9:36 a.m. on the Tokyo Stock Exchange, leading gains by other mills.
Japan Demand
Crude-steel demand in Japan, Asia's largest economy, will probably rise to an almost 35-year high this quarter, the government said yesterday. Nippon Steel last month raised contract prices of steel plate for domestic shipbuilders and machinery makers by about 40 percent to a record.
``These agreements are a strong endorsement of the settlement reached last week and reflect the very strong demand for our products across the world's fastest-growing markets,'' Sam Walsh, Rio's iron ore chief executive, said in the statement.
Rio is increasing production from its Pilbara operations in Western Australia to 320 million metric tons a year by 2012 and has a target beyond that of 420 million tons a year, the company said. It produced 145 million tons last year from the mines.
BHP, the world's largest mining company, said June 24 that the prices agreed by Rio are too small to cover extra shipping costs. Chinese mills, the world's largest consumers of the ore, will resist any attempt by BHP to win a larger price than agreed to with Rio, an official familiar with the talks said June 25.
The price rise won by Rio is higher than the 65 percent to 71 percent increase agreed to in February by Cia. Vale do Rio Doce, the world's biggest iron-ore producer.
Vale Return?
``Given Rio and BHP are both Australian suppliers, BHP is also likely to settle its iron ore deals at a similar level to Rio's,'' Lee Won Jae, a steel analyst with SK Securities Co., said from Seoul by phone. ``Of more concern to steelmakers is whether Vale comes back to ask for more.''
Central banks in Asia are battling to control price pressures, with Indonesia, India, Taiwan and the Philippines all raising interest rates in the past month. Energy and raw-material prices have risen too fast and inflation pressures were continuing to build, China's central bank said last month.
``Rising raw material prices including iron ore are directly fuelling concerns about inflation,'' said SK Securities' Lee, who couldn't rule out further increases by Posco in product prices. ``The impact is significant, with gains in steel prices pushing up costs for builders, automakers and other industries.''
Inflation in Korea will accelerate to the fastest pace in a decade, propelled by record fuel and food prices, the Bank of Korea said today. Slower growth is likely to prevent the Bank of Japan from raising its key interest rate from 0.5 percent this year, even as inflation runs at the fastest pace in a decade, according to economists surveyed by Bloomberg News. Inflation is being fueled in part by higher prices for steel.
Global economy may be close to a "tipping point" says the Bank for International Settlements - the banker for central banks
Jun 30, 2008
The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements (BIS) said on Monday.
In its 78th Annual Report released today, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."
"Over time, this could potentially even lead to deflation," it said.
The BIS said that while a severe slowdown is not inevitable, it believes that the risks of a sharp downturn are very real, and centered on the financial system. It warned that the process of cutting back on borrowing after many years of accumulating debt could lead to "much slower growth than is generally expected."
The bank says that the reduced availability of credit could force some financial institutions to sell assets at a time when buyers are hard to find - an outcome that could lead to another round of price declines and losses at banks. "The impact of such fire sales on prices, and on the capital of financial institutions, could be substantial," it said.
The BIS said that after a number of years of strong global growth, low inflation and stable financial markets, the situation deteriorated rapidly in the period under review. Most notable was the onset of turmoil in the US market for subprime mortgages, which rapidly affected many other financial markets and eventually called into question the adequacy of capital at a number of large US and European banks. At the same time, US growth slowed markedly, reflecting setbacks in the housing market, while global inflation rose significantly under the particular influence of higher commodity prices.
This sudden change in financial conditions was blamed by some on shortcomings in the extension of the long-standing originate-to-distribute model to new mortgage products in recent years. Others, however, noted that the sudden deterioration in both financial and macroeconomic conditions looked more like a typical "bust" after a credit "boom". The bank says several factors seem to support this second hypothesis: the previous rapid growth of global monetary and credit aggregates; an extended period of low real interest rates; the unusually high price of many assets (both financial and real); and the way in which spending patterns in different countries (the United States and China in particular) reflected their different stages of financial development (encouraging consumption and investment respectively).
The BIS says a disorderly decline in the dollar remains a possibility as losses on US assets pile up and the current-account deficit triggers ``a sudden rush for the exits."
A plunge in the currency may happen even after its ``remarkably orderly'' 14 percent slide against the euro in the past year, the Basel, Switzerland-based BIS said in an annual report today.
``Foreign investors in US dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency,'' the BIS said. ``While unlikely, indeed highly improbable for public-sector investors, a sudden rush for the exits cannot be ruled out completely.''
The fundamental cause of today’s problems in the global economy is excessive and imprudent credit growth over a long period, the BIS says. This always threatened two unwelcome outcomes: a rise in inflation and an accumulation of debt-related imbalances which would at some point prove to be unsustainable. In the event, both unwelcome phenomena are being experienced at the same time. Leaning against current inflationary pressures should imply a significantly less accommodating bias to global policy overall, even though this could create some short-run difficulties in some countries.
The BIS says it notes that the experience of the recent financial turmoil shows the need for a new macrofinancial stability framework to resist actively the inherent procyclicality of the financial system. This would require a primary focus on systemic issues and a much more countercyclical use of policy instruments (reducing the impact of a boom on the upswing of the business cycle). It also demands closer cooperation between the central banking and regulatory communities in trying to identify the build-up of systemic risks, deciding what to do to mitigate them, and agreeing in advance on steps that might be taken to manage periods of stress.
Speaking today, BIS General Manager Malcolm Knight noted that “central banks face a difficult dilemma because inflation pressures have come to the surface just when downside risks to growth have increased”. Moreover, important aspects of central bank functions have come under consideration, including how they provide liquidity to banks and their role in financial system oversight. “The BIS looks forward to working closely with both central banks and regulators in developing better analytical frameworks for addressing these important questions,” Knight added.
The 78th Annual Report was presented at the Bank’s Annual General Meeting held today in Basel, Switzerland, and chaired by Jean-Pierre Roth, Chairman of the BIS Board of Directors. Representatives from more than 130 central banks and international institutions attended.
Anwar lodges report against IGP, AG
July 01, 2008
PKR de facto leader Anwar Ibrahim today lodged a police report against police chief Musa Hassan and attorney-general Abdul Gani Patail over their alleged misconduct during his trials 10 years ago.
Anwar arrived at the Selangor state police headquarters in Shah Alam at about 2.50pm, accompanied by his lawyer Sankara Nair.Four of his party leaders, including vice president R Sivarasa and treasurer William Leong, had arrived much earlier at about 2.20pm and waited for Anwar to come to lodge the report.Outside the station, several other party leaders, including two of PKR's MPs N Gobalakrishnan and Yusmadi Yusoff, were disappointed that they weren't allowed into the station to accompany Anwar to make the report.
Even Anwar's daughter Nurul Izzah was not allowed into the station, creating some tension at the entrance. The police said that they would only allow five people in to lodge the report.
Some 30 supporters had also gathered outside the station.
After some 30 minutes, Anwar left the station - at about 3.20pm - to the PKR headquarters in Tropicana, Petaling Jaya where he is expected to hold a press conference.
Rally tonight
Anwar had earlier said that he had evidence implicating the inspector-general of police and AG in the misconduct, including fabrication of evidence in the cases launched against him after his sacking from government.He added that a fresh police report lodged against him for sodomy was a result of "interested parties to attack me in retaliation" over this evidence in his possession.The report alleging sodomy was filed by Anwar's aide, 23-year-old Mohd Saiful Bukhari Azlan, last Saturday.Anwar claimed that the fresh accusation against him was a "complete fabrication".Later tonight, PKR plans to hold a rally at the Stadium Melawati in Shah Alam, scheduled to kick off at 8.30pm.
Post a Comment