May 2010

Video: Tassapon Says AirAsia Considering Thai IPO in 2011: Video

May 30, 2010

May 31 (Bloomberg) — Thai AirAsia Chief Executive Officer Tassapon Bijleveld talks with Bloomberg’s Susan Li about the outlook for an initial public offering of its unit in Thailand. Speaking from Bangkok, Tassapon also discusses the airline’s ticket promotions and the impact of political unrest in Thailand on the tourism industry. (Source: Bloomberg)

Read the full article →

Video: Tassapon Says AirAsia Considering Thai IPO in 2011: Video

May 30, 2010

May 31 (Bloomberg) — Thai AirAsia Chief Executive Officer Tassapon Bijleveld talks with Bloomberg’s Susan Li about the outlook for an initial public offering of its unit in Thailand. Speaking from Bangkok, Tassapon also discusses the airline’s ticket promotions and the impact of political unrest in Thailand on the tourism industry. (Source: Bloomberg)

Read the full article →

Bernanke Mulls Higher Interest Rates, Reeling In Stimulus

May 30, 2010

WASHINGTON — The delicate task ahead for the Federal Reserve and other central banks is deciding when to start boosting interest rates and reeling in all the stimulus pumped out during the global financial crisis, Fed Chairman Ben Bernanke said Sunday. Bernanke, however, didn’t provide any new clues on that front. As is typically the case in the early stages of an economic recovery, central bank officials “will have to weigh the risks of a premature exit against those of leaving expansionary policy in place for too long,” Bernanke said in prepared remarks to a conference sponsored by the Bank of Korea in Seoul, South Korea. The Fed’s chief’s remarks were prerecorded and delivered via video link. Tightening credit too soon risks short-circuiting countries’ economic recoveries. Waiting too long could risk unleashing inflation and sparking a dangerous new wave of speculation like the one that powered the housing boom and its devastating bust. Because economic conditions vary country by country, the appropriate time to start tightening credit, varies, too, Bernanke said. “To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction,” he said. In the United States, the Fed has held a key interest rate at a record low near zero since December 2008. Just last month, he repeated a pledge to hold rates at super-low levels for an “extended period” to nurture the fledging recovery. Fears that a spreading debt crisis in Europe could hurt the U.S. recovery are prompting some economists to predict the Fed will be on the sidelines for longer than anticipated. A growing number of economists now think the Fed will hold rates at record lows – well into next year, or perhaps into 2012. Just a month ago, many had thought the Fed would start raising rates near the end of this year. Under the leadership of its new governor, Kim Choong-soo, the Bank of Korea last month also left its key interest rate at a record low of 2 percent. Kim and other BOK policymakers must eventually decide when South Korea’s economic recovery is strong enough to withstand higher borrowing costs. Another challenge for central bank officials will be to make good use of the lessons learned during the global financial crisis, which hit its worst point in the fall of 2008, to sharpen its crisis-fighting tools, Bernanke said. Countries, revamping financial regulations to better prevent another crisis, must work together to make sure the reforms are “consistent and coordinated across countries,” Bernanke said. Congress is moving closer to a final package. On a global level, leaders of the Group of Twenty countries meet next month in Canada, where financial reform is a top issue.

Read the full article →

Bernanke Mulls Higher Interest Rates, Reeling In Stimulus

May 30, 2010

WASHINGTON — The delicate task ahead for the Federal Reserve and other central banks is deciding when to start boosting interest rates and reeling in all the stimulus pumped out during the global financial crisis, Fed Chairman Ben Bernanke said Sunday. Bernanke, however, didn’t provide any new clues on that front. As is typically the case in the early stages of an economic recovery, central bank officials “will have to weigh the risks of a premature exit against those of leaving expansionary policy in place for too long,” Bernanke said in prepared remarks to a conference sponsored by the Bank of Korea in Seoul, South Korea. The Fed’s chief’s remarks were prerecorded and delivered via video link. Tightening credit too soon risks short-circuiting countries’ economic recoveries. Waiting too long could risk unleashing inflation and sparking a dangerous new wave of speculation like the one that powered the housing boom and its devastating bust. Because economic conditions vary country by country, the appropriate time to start tightening credit, varies, too, Bernanke said. “To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction,” he said. In the United States, the Fed has held a key interest rate at a record low near zero since December 2008. Just last month, he repeated a pledge to hold rates at super-low levels for an “extended period” to nurture the fledging recovery. Fears that a spreading debt crisis in Europe could hurt the U.S. recovery are prompting some economists to predict the Fed will be on the sidelines for longer than anticipated. A growing number of economists now think the Fed will hold rates at record lows – well into next year, or perhaps into 2012. Just a month ago, many had thought the Fed would start raising rates near the end of this year. Under the leadership of its new governor, Kim Choong-soo, the Bank of Korea last month also left its key interest rate at a record low of 2 percent. Kim and other BOK policymakers must eventually decide when South Korea’s economic recovery is strong enough to withstand higher borrowing costs. Another challenge for central bank officials will be to make good use of the lessons learned during the global financial crisis, which hit its worst point in the fall of 2008, to sharpen its crisis-fighting tools, Bernanke said. Countries, revamping financial regulations to better prevent another crisis, must work together to make sure the reforms are “consistent and coordinated across countries,” Bernanke said. Congress is moving closer to a final package. On a global level, leaders of the Group of Twenty countries meet next month in Canada, where financial reform is a top issue.

Read the full article →

Japan Factory Output Rises Less Than Estimated, Signaling Recovery to Slow

May 30, 2010

By Keiko Ujikane May 31 (Bloomberg) — Japan’s industrial production increased less than economists forecast in April. Factory output rose 1.3 percent from March, when it gained 1.2 percent, the Trade Ministry said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for a 2.5 percent increase. Honda Motor Co. and Murata Manufacturing Co. are among the Japanese companies that are benefiting from global demand. Data last week showed the nation’s unemployment rate rose, household spending fell and deflation persisted, indicating that the manufacturer rebound has been slow to reach consumers. “Companies are increasing production to meet demand as exports continue to grow,” Kyohei Morita , chief economist at Barclays Capital in Tokyo, said before the report was released. The yen traded at 91.22 per dollar at 8:53 a.m. in Tokyo from 91.18 before the report. Companies expected to increase production 0.4 percent in May from a month earlier and 0.3 percent in June, today’s report showed. Today’s data came after a government report last week showed exports rose more than economists estimated in April, a sign that the nation’s export-led recovery may be resilient in the face of the European sovereign crisis, triggered by Greece. Concern that the European financial turmoil will slow global growth sent the Nikkei 225 Stock Average more than 10 percent lower this month. Japanese companies are tapping Asia’s accelerating growth. Honda Motor , Japan’s second-largest carmaker, will raise production capacity in China by 28 percent to 830,000 vehicles a year by the second half of 2012 and introduce two new models, Chief Executive Officer Takanobu Ito said last week. Raising Output Murata Manufacturing , maker of 35 percent of the world’s ceramic capacitors, plans to raise output of non-ceramic devices to fend off Asian rivals including Samsung Electro-Mechanics Co. , President Tsuneo Murata said this month. Exporters from Hitachi Ltd. to Toyota Motor Corp. forecast better earnings for the year ending March 31. The rebound will prompt companies to increase investment, said economist Yuichi Kodama . “Production is rebounding and companies’ overcapacity is easing,” said Kodama , chief economist in Tokyo at Meiji Yasuda Life Insurance Co. “There’s no doubt that capital spending will have a solid recovery in coming months.” Still, the pace of the export-led expansion may lose momentum as the effects of stimulus spending taken by governments worldwide last year wear off, according to Naoki Tsuchiyama , market economist at Mizuho Securities Co. in Tokyo. He also said government spending cuts in Europe may damp demand for Japanese cars and electronic goods over time. “Production will remain in a recovery trend but its pace of growth may slow in the months ahead,” Tsuchiyama said. “The effects of the governments’ stimulus will wane, and we can’t ignore the European sovereign problem as a downside risk to the global economy.” To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

Read the full article →

Evans Signals Europe’s Crisis Will Delay Fed Rate Increase `A Little Bit’

May 30, 2010

By Aki Ito May 31 (Bloomberg) — Federal Reserve Bank of Chicago President Charles Evans indicated that the European sovereign debt crisis will prompt the U.S. central bank to delay raising interest rates. Evans told reporters in Seoul today that he “wouldn’t be surprised” if the Fed’s policy of keeping rates low “gets extended just a little bit.” Philadelphia Fed President Charles Plosser , who is attending the same event, said separately that “how the crisis in Europe ends up affecting the economy will dictate how we will respond.” Today’s comments underscore the attention global policy makers are paying to the potential consequences of the European crisis sparked by ballooning fiscal deficits from Greece to Spain and Portugal. In Asia, central banks from Australia to Indonesia and South Korea are projected to keep rates unchanged this week as they gauge the effect on the global recovery. “The European situation adds uncertainty to the economic outlook,” Evans said at a press briefing while attending a conference hosted by the Bank of Korea. He said lower-than- expected demand for U.S. exports because of slower growth in Europe will “dampen the recovery a little bit.” U.S. central bankers on April 28 kept the benchmark federal funds rate in a range of zero to 0.25 percent, where it has been since December 2008, and said “subdued” inflation and high unemployment are likely to keep rates “exceptionally low.” Low Inflation It’s appropriate to keep an accommodative monetary policy for now because inflation is “seriously under-running” price stability and unemployment is “very high,” said Evans, who along with Plosser isn’t a voting member of the Federal Open Market Committee this year. “But, if the situation turns rapidly, if inflation expectations were to bounce back in a way that we weren’t expecting,” the Fed “will respond more quickly,” he added. Plosser said he will “wait and see” how events in Europe might affect Fed policy. “It’s certainly true that there are things that could change the pace of our exit strategy, but I don’t see those happening as of yet,” he said. Fed officials to date have indicated the damage to the U.S. economy’s expansion from Europe will be limited. Richmond Fed President Jeffrey Lacker said in a Bloomberg Television interview last week that the “most likely outcome” is shaving “a tenth or two off my growth forecast for this year.” St. Louis Fed President James Bullard said in a May 26 speech in London that the European crisis “will probably fall short of becoming a worldwide recessionary shock.” At the same time, evidence of rising stress in bank funding markets spurred the Fed to reopen currency-swap lines with central banks from the euro region, U.K., Canada, Switzerland and Japan this month. Stall Recovery “A deeper contraction in Europe associated with sharp financial dislocations would have the potential to stall the recovery of the entire global economy, and this scenario would have far more serious consequences for U.S. trade and economic growth,” Fed Governor Daniel Tarullo said May 20 in testimony to House Financial Services subcommittees, making the case for the restarting of the swaps. Bank of Korea Governor Kim Choong Soo yesterday proposed an “institutionalization” of swaps to help establish a global safety net. To contact the reporter on this story: Aki Ito in Seoul at aito16@bloomberg.net

Read the full article →

AIG Negotiates to Salvage AIA Deal as Thiam Seeks to Cut Price

May 30, 2010

By Hugh Son May 31 (Bloomberg) — American International Group Inc. , the bailed-out insurer, remains in negotiations to salvage the sale of its main Asia unit after Prudential Plc requested a lower price to win shareholders’ approval. Prudential asked that the $35.5 billion price for AIA Group Ltd. be cut to about $29 billion to $30 billion, and New York- based AIG is seeking at least $32 billion, said a person with knowledge of the talks who declined to be identified because they are private. The Sunday Times reported that Prudential won backing for the deal from investors provided it can cut the price by more than 10 percent. AIG was forced to reopen negotiations when some of London- based Prudential’s biggest shareholders said they may reject the transaction at a June 7 meeting. The U.S. Treasury Department, which helped rescue AIG in 2008, said it hadn’t considered alternatives to the original terms as of late May 28, and AIG signaled it has other options for AIA, according to a person briefed on the stance of management. “They need to get the price down, otherwise there’s no deal,” Julian Chillingworth , who helps manage $21 billion including Prudential stock at Rathbone Brothers Plc in London, said in a telephone interview yesterday. “We’re looking for a meaningful reduction. The market’s roughly 10 percent lower than when they started the deal, so you need a reflection of that plus a bit more.” ‘Valuable Business’ Andrew Williams , a spokesman for Treasury, said May 28 that the department hasn’t weighed alternatives to the $35.5 billion contract announced in March and that “AIA is a valuable business for which there is significant interest.” AIG’s board met that day and hadn’t considered a reduced offer, according to a person with knowledge of the meeting. The board will ultimately decide if it will accept a new deal, the person said. Joe Norton , a spokesman for AIG, didn’t return a call seeking comment. Prudential’s Edward Brewster declined to comment. Prudential Chief Executive Officer Tidjane Thiam , 47, needs 75 percent of investors to support a rights offer at the insurer’s annual general meeting. Prudential investors including BlackRock Inc. and Fidelity Investments said the takeover was too expensive, a person with knowledge of the matter said last week. Rescue in 2008 Prudential’s biggest investor , Los Angeles-based Capital Group Cos. , is expected to vote in favor of the deal if the price for AIA Group Ltd. drops to between $31 billion and $32 billion, the Sunday Times reported, without saying where it got the information. The U.S. government, which took a stake of almost 80 percent in AIG after the 2008 rescue, is willing to allow the insurer to lower the price, people familiar with the matter have said. The $35.5 billion deal announced in March included about $25 billion in cash and the rest in securities linked to Prudential shares. Prudential’s latest offer of about $30 billion mostly reduced the amount of securities AIG would receive, said a person with knowledge of the discussions. Under the original terms of the sale, the 162-year-old British insurer had to pull off a $21 billion rights offer, the biggest for an acquisition in history, at a time when Europe’s sovereign debt crisis was sidelining corporate fundraisings worldwide. ‘A Very Aggressive Price’ At least 19 companies have postponed or withdrawn $5 billion in U.S. debt sales since April 13, data compiled by Bloomberg show. Investment banking fees from acquisition advice, share and bond sales in Western Europe dropped 17 percent in the first four months of 2010 compared with the previous year, New York-based research firm Freeman & Co. said. AIG had negotiated “a very aggressive price” for AIA, CEO Robert Benmosche told the Congressional Oversight Panel on May 26 during a hearing into the company’s bailout. The unit may be valued at slightly less than $30 billion in a public offering, according to an analysis done before the March announcement by Angelo Graci , managing director at Chapdelaine Credit Partners Selling AIA, which operates in 13 markets from China to Australia and has 23 million customers, would be AIG’s biggest step to repay U.S. taxpayers for loans within its $182.3 billion government bailout. If the Prudential deal fails, it could delay that effort. The insurer planned to use proceeds from the sale, and a separate deal to sell American Life Insurance Co. to MetLife Inc., to repay a Federal Reserve credit line . Public Offering The insurer could hold a public offering for AIA should the sale to Prudential fail, Jim Millstein , the Treasury’s chief restructuring officer, said May 26. AIG had previously planned on a public offering for AIA until Benmosche, 66, decided to accept Prudential’s offer. “The deal’s not dead until it’s dead,” Eamonn Flanagan , a Liverpool, England-based analyst at Shore Capital Group Plc, said in an interview. “Treasury could just be playing hardball here. There will be a lot of posturing from both sides.” He recommends buying Prudential shares. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Read the full article →

BP Seeks to Catch Most Oil as U.S. Exerts Spill Role

May 30, 2010

By Steve Geimann and Carol Wolf May 30 (Bloomberg) — BP Plc said it will seek to contain a majority of oil gushing from its Gulf of Mexico well with a new tactic to plug the leak as a White House adviser said the U.S. is now telling the company “what to do.” The company encountered “too much flow” and the “top kill” using 30,000 barrels of mud was abandoned in favor of placing a cap over the well, Managing Director Robert Dudley said today on CNN’s “State of the Union” program. “We believe we will get a majority of the oil and gas,” Dudley said. U.S. engineers, led by Energy Secretary Steven Chu , yesterday told BP of “grave concerns” about drilling mud, and the company halted the process, White House energy and climate adviser Carol Browner said on CBS’s “Face the Nation” broadcast. “At the end of the day, the government tells BP what to do,” Browner said on NBC’s “Meet the Press.” BP had put the chances of the top kill succeeding at 60 percent to 70 percent. The company made three attempts before giving up last night. “We failed to wrestle this beast to the ground,” Dudley said on “Fox News Sunday.” Containment has “no certainty” of success, he said on Fox. “The percentages are better” than forcing mud into the well, he said. Chu met BP engineers yesterday and told them “it was too dangerous” to continue forcing mud into the well, Browner said on CBS’s “Face the Nation” broadcast. After the scientists met and “we told them of our very, very grave concerns,” the company abandoned the process, Browner said. 4 to 7 Days BP didn’t provide an estimate of when the flow might be stopped with the new method. Installing the cap should take about four to seven days, and after that the company will begin installing a new blowout preventer, a series of valves designed to cut off the flow from the well, Doug Suttles , chief operating officer of BP America Inc., said yesterday. BP’s failure using drilling mud was “enormously frustrating and really maddening” while the federal response to protect the coast is failing, Senator David Vitter , a Louisiana Republican, said on CNN. The federal government needs to accelerate delivery of containment booms and start emergency dredging of barrier islands to block oil from reaching coastal marshes, Vitter said. A plan proposed by state and local officials two weeks ago has been approved by the Army Corps of Engineers, though only for about 2 percent of the plan, Vitter said. “That’s really the federal response to oversee and lead that effort to protect the coast and the marsh,” he said. “It has been a failure so far.” Louisiana Sand Booms Louisiana Governor Bobby Jindal , who with Vitter met President Barack Obama on May 28, said the U.S. should require BP to pay the costs to build 40 miles of sand boom protecting his state’s wetlands from oil. “The federal government shouldn’t be making excuses for BP,” said Jindal on ABC’s “This Week” broadcast. “This is their spill, their oil. They’re the responsible party. Make them responsible.” Representative Edward Markey , a Massachusetts Democrat, today endorsed a suggestion by House Speaker Nancy Pelosi made on Bloomberg Television’s “Political Capital With Al Hunt” to lift the financial liability limit for oil companies such as BP. “I do not believe that large energy companies should be able to escape having unlimited liability for the catastrophes which they create,” Markey said on CBS. “If the oil industry wants to drill in ultra-deep waters, we need ultra-safe technologies as well.” Lower-Marine Riser In the Gulf, BP has started deploying a containment device known as a lower-marine riser package cap. The cap will attach to the top of the well’s existing blowout preventer and will then funnel oil and gas into a pipe that extends to a ship on the surface, Suttles said. After the attachment of the lower-marine riser package cap, BP plans to install the new blowout preventer on top of the existing one, Suttles said. BP will then try to use the valves on the new blowout preventer to stop the flow. “We’re still looking at a month before we get this thing killed,” Les Ply, a retired mud engineering consultant for the oil industry, said yesterday in a telephone interview. “I think we’re looking at a week to 10 days to get this riser and cap in place.” The new method, if successful, would stop the leak long enough for a so-called relief well to be drilled nearby and provide a permanent seal. ‘Enormous Mistakes’ BP has made “enormous mistakes and probably cut corners,” leading up to the April 20 explosion on the Deepwater Horizon drilling platform, Vitter said. “There were some horrible things that went wrong and it seems like horrible decisions that led to the initial event,” he said. Dudley, in response to a question on “Fox News Sunday” about cutting corners, said “I don’t believe they did” and that the company used well and drilling designs adopted by other companies. “What’s happened out in the Gulf today is something that is an industry issue to understand this failsafe use of equipment,” Dudley said. “It’s going to have implications for the drilling industry not in the U.S. only, but all around the world. Everyone’s going to step back and learn from this.” To contact the reporter on this story: Steve Geimann in Washington at sgeimann@bloomberg.net

Read the full article →

China Real Estate Bubble Bursts in Bond Market Credit Markets

May 30, 2010

By Katrina Nicholas May 31 (Bloomberg) — Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating. Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd. , Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan. Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent jump in real estate prices in April from a year earlier spurred the state to increase regulation. “New issues by Chinese developers will stall for the time being,” Vince Chan , the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, a fixed-income advisory and brokerage firm founded by two former Citigroup Inc. bankers, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.” Widening Spreads The amount of dollar bonds issued by China developers represents 45 percent of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. The yield spread on $350 million of 13.5 percent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings Inc. prices on Bloomberg show. Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website . An investor who bought the company’s 2015 bonds at par would have lost 15.5 percent. Elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries widened 5 basis points last week to 193 basis points, or 1.93 percentage points, Bank of America Merrill Lynch index data show. The spread, which peaked at 511 on March 30, 2009, is up from this year’s low of 142 on April 21. Average yields rose to 4.06 percent, the highest based on weekly closes since the period ended March 5. Sales Slow Corporate bond issuance worldwide slowed this month to $66.1 billion, down from $183 billion in April and the least since December 2000, according to data compiled by Bloomberg. “Companies have to be prepared to strike and strike quickly,” Rick Martin, the London-based director of treasury at Virgin Media Inc. , the U.K.’s second-largest pay-television company, said at a May 28 briefing in London. “The key is to have the team ready and primed and able to pull the trigger at short notice. I can’t think of a time when the forces have been so polarizing.” The cost to insure U.S. corporate debt against default rose last week. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses or to speculate on creditworthiness, increased 25.1 basis points this month to a mid-price of 117.2 basis points. The index typically rises as investor confidence deteriorates and falls as it improves. Bond risk rose in Asia today, with the Markit iTraxx Asia index up 4 basis points, according to Royal Bank of Scotland Group Plc. The Markit iTraxx Japan index rose 5 basis points, Morgan Stanley prices show. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. Emerging Market In emerging markets, spreads narrowed 16 basis points last week to 321 basis points, trimming the monthly increase to 63, according to the JPMorgan Emerging Market Bond Index. China has added to regulations designed to cool the property market several times this year, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third- home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes. Shanghai’s plan to begin a property tax on residential real estate was submitted to the central government for review, the China Securities Journal reported today, citing unidentified people. Demand ‘Premium’ Goldman Sachs lowered its 2010 net income estimates for Chinese developers by an average 13 percent and reduced earnings forecasts for the next two years by 25 percent, analysts led by Yi Wang wrote in a May 19 report. Credit Suisse pared earnings- per-share estimates by as much as 15 percent for 2010 and 20 percent for 2011, citing the government’s clampdown. “With the negative headlines coming out of this sector, investors are less likely to be drawn to participate in new issues because of a high coupon,” Tan Chew May , a credit analyst for Aberdeen Asset Management Asia Ltd., which oversees $1.5 billion of Asian dollar debt, said in a phone interview from Singapore. “With the trend of widening spreads, new names are forced to come at premium.” China property developers paid coupons as high as 14 percent to issue dollar debt this year, compared with an average 9.2 percent for other companies in Asia and 6.2 percent for U.S. property companies. On average, Chinese property companies are paying a 10.875 percent coupon. Renhe’s Delayed Sale Glorious Property Holdings Ltd ., which has 26 real estate projects in cities including Shanghai, Beijing, Harbin and Changchun, postponed its first sale of dollar-denominated bonds in April. The Hong Kong-listed company cited poor credit market conditions for the delay. Renhe Commercial Holdings Co ., a developer of underground shopping centers based in Harbin, China, sold five-year, 11.75 percent dollar notes on May 18 to yield 974 basis points more than Treasuries after delaying the sale for two weeks. The relatively strong finances of China developers means some companies can afford to pay double-digit coupons, according to Andy Mantel , Hong Kong-based founder of hedge fund manager Pacific Sun Investment Management Ltd. Country Garden , which builds villas, townhouses and apartments in China, sold bonds in April with an 11.25 percent coupon. The company, controlled by China’s second-richest woman, Yang Huiyan , said contracted revenue in the first quarter rose 82 percent on sales in the Guangdong area. Fantasia’s Coupon “The sector is relatively better financed than it was two years ago when there were serious liquidity issues,” Mantel said in a phone interview. “Investors might not make any money on the actual bond, but they’ll get their interest payments.” Fantasia Holdings Group Co .’s $120 million of five-year bonds pay the highest coupon at 14 percent. The company develops commercial and residential complexes in China’s Pearl River Delta and Chengdu-Chongqing Economic Zone regions. It raised HK$3.18 billion ($408 million) from an initial share sale in Hong Kong in November, boosting cash reserves to $497 million from a deficit, Bloomberg data show. “Sales and pre-sales have increased cash balances for most companies by over 20 to 30 percent while fresh debt issuance has extended maturity profiles,” analysts led by Raghav Bhandari at CreditSights Asia Research Ltd. wrote in a note to clients May 20. “Companies are in a much better position to handle this period of strain than they were a year ago.” High Yield “People are attracted by the high coupons of the sector, but are fearful of the regulatory announcements and how it might affect the credits,” Sean Henderson , head of Asia debt syndication at HSBC Holdings Plc, said in a phone interview from Hong Kong. “More recently, the overall market backdrop has taken the whole high-yield sector lower.” The yield spread on speculative-grade company dollar bonds in Asia rose 174 basis points this month as of May 28, compared with 50 basis points for investment-grade companies, JPMorgan indexes show. High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Credit-default swaps insuring against Country Garden defaulting on its debt rose 343 basis points to 10.39 percentage point this month through May 18. The contracts suggest investors are pricing in a 50 percent chance of default. Similar contracts insuring Agile’s debt have soared 3.85 percentage points since mid-April, when China’s central bank pledged to implement new lending rules to cool real estate “madness.” At current rates investors are pricing in a 48 percent chance of default. Chinese property bonds are unlikely “to recover meaningfully anytime soon,” Amias Berman’s Chan said. “If we start to see the regulatory measures taking effect in the next few months then there may be a reversal of fortunes. But optimistically I think it’ll be the third or fourth quarter before things stabilize.” To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

Read the full article →

Hatoyama Regrets Japan Coalition Split Over Base as Approval Rating Drops

May 30, 2010

By Sachiko Sakamaki and Takashi Hirokawa May 31 (Bloomberg) — Japan’s Prime Minister Yukio Hatoyama said he regretted the departure of a minority party in his coalition, as new polls showed rising discontent with his government less than two months before parliamentary elections. The Social Democratic Party yesterday left the government after Hatoyama fired leader Mizuho Fukushima from his Cabinet for refusing to endorse his agreement with the U.S. to relocate a Marine base within Okinawa. The move reduces the Democratic Party of Japan -led coalition’s majority in the upper house ahead of elections for half the chamber’s seats set for July. “It’s regrettable that the Social Democrats left the government,” Hatoyama told reporters today outside his office in Tokyo. “Unfortunately, there was a fundamental disagreement in regard to national security.” Hatoyama’s popularity has plunged since the DPJ’s landslide August victory in the more powerful lower house, with voters disenchanted over campaign finance scandals and his vacillating over where to move the Futenma Marine Air Base. Three polls released today showed his approval rating at or below 20 percent and six in 10 voters think he should quit. “This is a blow but it may be temporary because there’s another month until the race starts,” said Hirotada Asakawa , a Tokyo-based independent political commentator. “It’s already expected that the DPJ cannot gain a majority and the party will need a new coalition framework.” Voter Discontent Hatoyama’s favorability rating fell to 19 percent from 24 percent three weeks ago, while his disapproval rating was at 75 percent, the Yomiuri newspaper said today. The Asahi newspaper said his approval rating was at 17 percent, while the Mainichi newspaper put it at 20 percent. Almost 60 percent think he should quit over the base issue, the Yomiuri and Mainichi said. None of the polls, all of which were taken over the weekend, gave a margin of error. “We must get over this by holding on to our convictions,” Hatoyama said today. “I will do what I can to regain people’s trust.” Half of the 242 upper-house seats are at stake in the July balloting. The DPJ and its other junior partner, the People’s New Party , have 122 legislators, and losing that majority could slow Hatoyama’s legislative goals of increasing social welfare spending while aiming to cut the world’s largest public debt. The U.S. and Japan agreed on May 28 to most parts of an existing plan to relocate the Futenma base on the island to the Henoko coastal area. Hatoyama has repeatedly apologized for breaking a campaign pledge to transfer the facility off of Okinawa. The island, 950 miles (1,530 kilometers) south of Tokyo, houses 75 percent of the American bases and more than half of the 50,000 U.S. troops stationed in Japan to provide for the country’s defense under a 50-year-old security treaty. The U.S. pushed Japan to uphold a 2006 agreement to move Futenma within Okinawa by 2014, as part of a $10.3 billion plan that would also transfer 8,000 Marines to Guam. The people of Okinawa want it moved elsewhere, citing increased crime, pollution and noise. To contact the reporters on this story: Takashi Hirokawa in Okinawa at thirokawa@bloomberg.net ; Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net

Read the full article →

BP Undersea Robots to Begin Next Attempt to Curb Record Oil Spill in Gulf

May 30, 2010

By Jim Polson

Read the full article →

Bernanke Says Central Banks May Differ on Timing of Monetary Tightening

May 30, 2010

By Scott Lanman May 31 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said central banks around the world will probably unwind monetary expansion at different times because of differences among their economies. “In the medium term, like the Federal Reserve and many other central banks, the Bank of Korea will have to manage its exit from accommodative policies,” Bernanke said in pre- recorded remarks to a conference hosted by South Korea’s central bank in Seoul today. The Bank of Korea “will have to weigh the risks of a premature exit against those of leaving expansionary policies in place for too long,” Bernanke said. The Fed chief didn’t elaborate on the outlook for the U.S. economy or monetary policy. Bernanke praised South Korea’s response to the global financial crisis over the last few years, including its decisions to reduce its policy interest rate by 3.25 percentage points and to set up a fund to keep its banking system stable. “This suite of policy responses helped stabilize Korean financial markets and promote a swift recovery of economic activity,” Bernanke told the Bank of Korea event, according to a text distributed by the Fed in Washington. South Korea’s stock market has erased much of its losses since late 2008, and gross domestic product has “rebounded decisively” since contracting at a 17 percent pace in the fourth quarter of 2008, he said. Asset Purchases In the U.S., the Fed cut its benchmark interest rate to near zero in December 2008 and purchased $1.7 trillion in Treasuries and housing debt to revive growth. Officials are debating when and how fast to raise rates and sell mortgage assets. “Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries,” Bernanke said. Countries must cooperate to improve financial regulation and ensure that firms are “well capitalized, liquid and transparent,” Bernanke said. The leadership of the Group of 20 countries is “essential” for producing effective and consistent changes, Bernanke said. In addition, central banks “must continue to place great weight on the factors that have been shown to enhance the credibility and effectiveness of monetary policy: central bank independence, accountability and transparency, and effective communication,” the Fed chief said. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net .

Read the full article →

Emerging-Market Equities Advance on Earnings, Paring 9.9% Slump This Month

May 30, 2010

By Shiyin Chen and Saeromi Shin May 31 (Bloomberg) — Emerging-market stocks advanced, trimming the benchmark index’s worst monthly loss since October 2008, on speculation corporate earnings in developing nations will weather Europe’s sovereign-debt crisis. The MSCI Emerging Markets Index rose 0.3 percent to 919.62 as of 10:51 a.m. in Singapore, adding to a three-day, 7.2 percent rally. The measure has dropped 9.9 percent in May. South Korea’s won was set for its biggest monthly drop since February 2009, leading losses among developing-nation currencies, while the cost of insuring Asia-Pacific bonds from non-payment rose after Fitch Ratings stripped Spain of its AAA credit rating. Spain, which has the euro region’s third-largest budget deficit, was cut to AA+ on May 28 at Fitch Ratings, a signal that the European debt crisis may worsen. Still, European Central Bank President Jean-Claude Trichet said today that emerging nations have overcome the global recession better than advanced countries and remain “a source of strength” for growth. “There seems to be a high perception that companies in Asian emerging nations are well positioned to benefit from China’s strong consumption growth,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages $26 billion. “We’re witnessing solid economic figures even amid the ongoing concern over Europe’s sovereign debt crisis.” Telekom Malaysia Bhd. and Genting Bhd. advanced after the Malaysian companies reported higher earnings, adding to evidence that domestic consumption may continue to boost corporate profits. Cheil Worldwide Inc. jumped 5 percent in Seoul after Credit Suisse Group AG upgraded the equities, citing its “strong” operations and the correction in the shares. Debt Crisis The European debt crisis weighed more heavily on emerging- nation currencies, which retreated on concern investors will avoid riskier assets. Developing-nation stock funds posted net outflows of $2.4 billion in the week ended May 26, Morgan Stanley said in a May 28 report, citing data from EPFR Global. South Korea’s won slid 0.5 percent to 1,200.65 per dollar. Bank of Korea Governor Kim Choong Soo proposed that central banks set up a permanent arrangement for foreign currency swaps to help address the type of funding shortages that emerged during the global financial crisis. “If Spain downgrades there’s going to be concern about who’s downgraded next,” said Gerrard Katz , head of foreign- exchange trading at Standard Chartered Plc in Hong Kong. “Interbank lending is quite tight, which is one of the reasons they are asking for those swap agreements. You could take that as kind of a negative outlook on sentiment.” Indonesia’s rupiah dropped 0.3 percent to 9,193 per dollar. The nation’s benchmark Jakarta Composite index climbed 1.9 percent. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

Read the full article →

Honda China Says Most Workers to Return to Work After Strike Halts Output

May 30, 2010

By Bloomberg News May 31 (Bloomberg) — Honda Motor Co. , Japan’s second- biggest automaker, said “most” workers at a parts factory in China were willing to end a strike that has stopped its auto production in the country. While the employees expressed willingness to end the walkout in a meeting with management yesterday, talks are ongoing and it’s unclear when they may return, Zhu Linjie , a Beijing-based spokesman for Honda, said by phone today. The carmaker’s Chinese plants will remain mostly closed today, and no decision has been made about output tomorrow, said Yasuko Matsuura , a company spokeswoman in Tokyo. The maker of Accord and Civic cars shut down all four of its auto assembly plants in China last week after workers at a parts unit went on strike demanding a pay raise. The walkout is the first to stop Honda ’s production in the country, the Tokyo- based company said last week. “If the strike ends in a short period of a few days, damage is light,” said Tatsuya Mizuno , director at Mizuno Credit Advisory in Tokyo. Still, Honda’s image in China may be damaged by the walkout, he said. Honda rose 0.2 percent to 2,784 yen as of the 11 a.m. trading break in Tokyo, while the benchmark Nikkei 225 Stock Average fell 0.2 percent. Pay Demand Honda closed two plants in Guangzhou, Guangdong province, on May 24 and factories in Guangzhou and Wuhan, Hubei province, on May 26 after 1,850 workers making transmissions and engine parts at Honda Auto Parts Manufacturing Co. in Foshan, Guangdong province, went on strike May 17. An export-only plant in Guangzhou will make 50 Jazz compact cars today using parts inventory, according to the company. The striking workers are demanding monthly pay be boosted to between 2,000 yuan ($293) and 2,500 yuan, from 1,500 yuan, Honda’s Matsuura said on May 27. Honda produces about 3,000 vehicles a day in China, according to Koji Endo , a Tokyo-based analyst at Advanced Research Japan. “It’s difficult to say, but my guess is that it will take less than a week to get production back at full capacity once the strike is resolved,” said Tianshu Xin, managing director at IHS Global Insight in Shanghai. Honda will likely add shifts to make up the lost production, he said. China Sales The affected factories, joint ventures between Honda and its Chinese partners, make models including the Accord sedan and Civic compact and have combined annual capacity of 650,000 units. China accounted for 17 percent of Honda’s global sales last year, and the brand ranked fifth in China by unit sales in April, according to J.D. Power & Associates. Honda may increase China sales 9 percent to 630,000 vehicles this year, Chief Executive Officer Takanobu Ito said last month. The parts factory, a wholly owned Honda subsidiary, started production in 2007 and makes transmissions for the Accord, City Odyssey and Fit models, according to the company. Honda plans to raise production capacity in China by 28 percent to 830,000 vehicles a year by the second half of 2012 and introduce two new models as car demand grows in the country, Ito said in Guangzhou on May 25. Auto sales in China may rise 17 percent to 16 million this year and annual demand may climb to more than 30 million, according to an official at the State Information Center. The strike is a sign that automakers can expect rising labor costs in China, according to Yasuhiro Matsumoto , an analyst at Shinsei Securities Co. in Tokyo. Trade unions and employers appear to be reporting a growing number of work stoppages in China, although there are no official numbers, according to the International Labor Organization in Beijing. “To enhance workers’ payrolls, production costs will rise,” said Mizuno at Mizuno Credit Advisory. — Tian Ying , Makiko Kitamura , Liza Lin . Editors: Terje Langeland , Ian Rowley To contact Bloomberg News staff for this story: Tian Ying in Beijing at +86-10-6649-7571 or ytian@bloomberg.net

Read the full article →

Healthscope Gets Two $1.5 Billion Bids, Topping Offer From Blackstone, TPG

May 30, 2010

By Simeon Bennett May 31 (Bloomberg) — Healthscope Ltd. received two additional takeover offers that value Australia’s second-biggest hospital owner at A$1.84 billion ($1.6 billion) and top a bid by Blackstone Group LP and its partners. The new proposals, both of A$5.80 a share, are 11 percent above Healthscope’s May 28 closing price. The board considers the offers to be at least equal to an earlier A$5.75-a-share bid, the Melbourne-based company said in a statement today. Last week, Blackstone joined TPG Capital and Carlyle Group in bidding for Healthscope, according to a person familiar with the matter. Healthscope, whose profit has grown an average of 36 percent over the past nine years, said it’s allowing the new bidders to review its financial accounts. Selling the pathology business and putting its hospitals in a real estate fund could value the shares at as much as A$7 each, UBS AG said. “A breakup makes most sense,” said Andrew Goodsall , a health-care analyst at UBS in Sydney, in a telephone interview. Healthscope’s managers “are solid operators,” he said. “If there’s earnings upside to be had, they would have had it.” Healthscope shares advanced 5 percent to A$5.49 as of 12:34 p.m. local time, headed for a two-year high. The S&P/ASX 200 Index slipped 0.3 percent. KKR Bid The stock has climbed 22 percent on the Australian stock exchange since first announcing a takeover approach on May 14. Concern among investors that the deal may not proceed is preventing the shares rising further, said John Hester , a health-care analyst at Linwar Securities Ltd. in Sydney. “These are non-binding offers,” Hester said in a telephone interview. “There’s potential for these bids to all fall over. If I was a significant holder, I’d certainly be looking to reduce my position.” Hester rates the stock “market perform.” Kohlberg Kravis Roberts & Co. may make a bid for Healthscope tomorrow, the Australian Financial Review reported today, without saying where it got the information. KKR may bid with another firm and offer about A$6 a share, the report said. Healthscope, which is being advised by Goldman Sachs JBWere Pty and Lazard Ltd., hasn’t given the names of any of its bidders. One may be a U.S.-based private hospital operator being advised by Citigroup Inc., the Australian Financial Review said in a separate report today, without identifying the company or saying where it got the information. Private hospital groups in Australia, including Healthscope’s larger rival Ramsay Health Care Ltd. , are benefiting from increasing demand from an aging population and government measures aimed at boosting private coverage. Uptake of health insurance reached a 27-year high in March and one in two Australians have hospital policies, Health Minister Nicola Roxon said this month. Healthscope owns or operates 43 hospitals in Australia, including the Prince of Wales Private Hospital in Sydney’s eastern suburbs and Melbourne Private Hospital on the fringe of the city’s central business district. It also runs the Gribbles pathology chain in Australia, New Zealand, Malaysia, Singapore and Mauritius. To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

Read the full article →

Yen Falls as Government Split Dents Refuge Appeal Euro Set for Month Drop

May 30, 2010

By Yasuhiko Seki May 31 (Bloomberg) — The yen dropped against its major counterparts amid speculation political turmoil will dent the currency’s safe-haven appeal after Japan’s Social Democratic Party left a three-way coalition government. The Japanese currency fell after a poll showed that more than half of the nation’s voters want Prime Minister Yukio Hatoyama to resign. The euro was poised for a sixth-straight monthly loss against the dollar amid concern Europe’s efforts to reduce fiscal deficits and stem a sovereign-debt crisis will undermine the region’s recovery. “There is no reason to buy the currency of a country when the political situation is unstable,” said Toshiya Yamauchi , a senior foreign-exchange analyst in Tokyo at online currency- trading company Ueda Harlow Ltd. “The yen has never been bought for positive reasons but merely drew interest when risk aversion was strong.” The yen declined to 91.41 per dollar as of 10:26 a.m. in Tokyo from 91.06 in New York on May 28. The Japanese currency slid to 112.56 per euro from 111.77 last week. The euro was at $1.2315 in Tokyo from $1.2273 in New York. Japan’s Social Democratic Party left the government after Hatoyama dismissed its only Cabinet minister, weakening the ruling coalition less than two months before parliamentary elections. ‘Want’ Resignation The Social Democrats voted to exit, party leader Mizuho Fukushima said yesterday in Tokyo, two days after Hatoyama fired her for refusing to endorse his agreement with the U.S. to relocate a U.S. Marine base to Henoko, Okinawa. The party sought to move the base off the island in line with local sentiment. Sixty-three percent of Japanese voters want Prime Minister Hatoyama to resign after he abandoned a campaign pledge to move the U.S. base, Nikkei English News said. The euro pared its biggest monthly drop since January 2009 on speculation that futures traders are exiting from bearish bets on the currency. “From a purely technical viewpoint, it would not be a surprise if the euro rebounded at any time,” said Kazumasa Yamaoka , a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. “But from a fundamental viewpoint, including lingering uncertainties over the depth of the sovereign crisis, there is no reason to believe that any rebound will be sustained.” Futures Bets The euro’s 14-day stochastic oscillator stayed for a sixth day below the 20 level that some traders use to signal an asset has fallen too quickly and is poised to rise. Futures traders decreased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain — so-called net shorts — was 106,736 on May 25, compared with 107,143 a week earlier. Net shorts reached a record 113,890 on May 11. Europe’s currency has slumped 7.8 percent this year against its major counterparts, according to Bloomberg Correlation-Weighted Currency Indexes, amid concern swelling budget deficits will lead to government defaults and an eventual breakup of the euro region. The dollar appreciated 9.2 percent, while the yen advanced 11.4 percent. Consumer Sentiment An index of executive and consumer sentiment in the 16 nations using the euro stood at 100.6 in May, unchanged from the previous month, according to a Bloomberg News survey of economists before the European Commission releases the data today. “Confidence in the euro remains low as the region’s credit problems show no signs of a resolution,” said Masahide Tanaka , a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “The euro will remain under selling pressure.” Fitch Ratings on May 28 stripped Spain of its AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth. European leaders announced on May 10 an almost $1 trillion package to backstop the region’s debt crisis. Spain had held the top rating since 2003. The downgrade “reflects Fitch’s assessment that the process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium term,” according to the ratings company. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net .

Read the full article →

Video: Sugar Daddy China Should Dock Kim’s Allowance: William Pesek

May 30, 2010

May 31 (Bloomberg) — Bloomberg columnist William Pesek speaks from Tokyo with Bloomberg’s Rishaad Salamat about China’s role in the standoff between North and South Korea. (Source: Bloomberg)

Read the full article →

Video: Sugar Daddy China Should Dock Kim’s Allowance: William Pesek

May 30, 2010

May 31 (Bloomberg) — Bloomberg columnist William Pesek speaks from Tokyo with Bloomberg’s Rishaad Salamat about China’s role in the standoff between North and South Korea. (Source: Bloomberg)

Read the full article →

Video: Wen Stays Silent on North Korea, Focuses on Peace: Video

May 30, 2010

May 31 (Bloomberg) — Bloomberg’s Stephen Engle reports on the meeting between South Korean President Lee Myung Bak, Japan’s Prime Minister Yukio Hatoyama and Chinese Premier Wen Jiabao to discuss tensions between North and South Korea. Wen ended two days of talks with his South Korean and Japanese counterparts with a call for calm in the region, resisting pressure to condemn North Korea. Bloomberg’s Rishaad Salamat also speaks. (Source: Bloomberg)

Read the full article →

Video: Queensland Sugar’s Winney Sees Prices Rising on Demand: Video

May 30, 2010

May 31 (Bloomberg) — Queensland Sugar Ltd. Chairman Alan Winney talks with Bloomberg’s Rishaad Salamat about the outlook for sugar prices. Winney, speaking from Singapore, also discusses how the monsoon in India is affecting the country’s sugar exports. (Source: Bloomberg)

Read the full article →

Gulf Oil Spill Response: ‘Tent Cities’ Built For Cleanup Crews

May 30, 2010

VENICE, La. — More than 40 trailers that can sleep up to 36 workers in bunks are being brought to Louisiana coastal communities to house temporary cleanup workers involved in the Gulf oil spill. Anthony Kelly, a subcontractor hired to set up the temporary housing, said Sunday in Venice that the air-conditioned trailers are similar to passenger train berths, with privacy curtains, lock boxes for personal items and electrical outlets. Shower trailers are also being brought in, along with generators to power the operation. BP CEO Tony Hayward says the company is narrowing cleanup of the nation’s worst oil spill to Louisiana. Hayward says the fight could last months as the company works on a relief well. Kelly owns Kelly and Company 1st Responders of Norwood, Mo.

Read the full article →

Gulf Oil Spill Response: ‘Tent Cities’ Built For Cleanup Crews

May 30, 2010

VENICE, La. — More than 40 trailers that can sleep up to 36 workers in bunks are being brought to Louisiana coastal communities to house temporary cleanup workers involved in the Gulf oil spill. Anthony Kelly, a subcontractor hired to set up the temporary housing, said Sunday in Venice that the air-conditioned trailers are similar to passenger train berths, with privacy curtains, lock boxes for personal items and electrical outlets. Shower trailers are also being brought in, along with generators to power the operation. BP CEO Tony Hayward says the company is narrowing cleanup of the nation’s worst oil spill to Louisiana. Hayward says the fight could last months as the company works on a relief well. Kelly owns Kelly and Company 1st Responders of Norwood, Mo.

Read the full article →

Travelport Promotes Hiroshi Shimizu as Worldspan’s Commercial Head in Japan, Korea and Guam

May 30, 2010

TOKYO–(Marketwire – May 30, 2010) – Travelport, one of the world’s largest global distribution system (GDS) providers and operators of the Apollo, Galileo and Worldspan platforms, has promoted Hiroshi Shimizu to Worldspan’s Commercial Head in Japan, South Korea and Guam. The promotion takes effect immediately. 

Read the full article →

Travelport Promotes Hiroshi Shimizu as Worldspan’s Commercial Head in Japan, Korea and Guam

May 30, 2010

TOKYO–(Marketwire – May 30, 2010) – Travelport, one of the world’s largest global distribution system (GDS) providers and operators of the Apollo, Galileo and Worldspan platforms, has promoted Hiroshi Shimizu to Worldspan’s Commercial Head in Japan, South Korea and Guam. The promotion takes effect immediately. 

Read the full article →

Video: Van Rijn Says Agricultural Bank IPO Needs to Move Ahead: Video

May 30, 2010

May 31 (Bloomberg) — Arnout van Rijn, chief investment officer for Asia at Robeco Hong Kong Ltd., talks with Bloomberg’s Rishaad Salamat about Agricultural Bank of China’s planned initial public offering. Agricultural Bank’s offering of shares may attract several billion U.S. dollars from a sovereign fund in the Middle East, the China Business News said today, citing unidentified people with knowledge of the matter.(Source: Bloomberg)

Read the full article →

Video: Shaw Expects Asian Investment in the U.K. to Increase: Video

May 30, 2010

May 31 (Bloomberg) — Brian Shaw, managing director of the business group at U.K. Trade & Investment, talks with Bloomberg’s Susan Li about the outlook for Asian investment into the U.K. Shaw, speaking from Hong Kong, also discusses Chinese acquisitions of U.K. companies. (Source: Bloomberg)

Read the full article →

Video: Marta Says U.S. States May `Sink’ Without Added Stimulus: Video

May 30, 2010

May 31 (Bloomberg) — T.J. Marta, founder of Marta On The Markets LLC, talks with Bloomberg’s Susan Li about the U.S. economy. Speaking by telephone from Princeton, New Jersey, Marta also discusses the outlook for stocks and the European debt crisis. (Source: Bloomberg)

Read the full article →

Simon Johnson: The Consensus on Big Banks Shifts, But Not at Treasury

May 30, 2010

Attitudes towards big banks are changing around the world and across the political spectrum. In the UK, the new center-right government is looking for ways to break them up : “We will take steps to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognizing that this will take time to get right, the commission will be given an initial time frame of one year to report.” The European Commission, among others, signals that a bank tax is coming ; presumably, as suggested by the IMF, this will have higher rates for bigger banks and for banks with less capital. And other European officials are increasingly worried by the lack of capital in German banks, by the recent reckless lending sprees in Ireland and Spain, and by the dangers posed by banks that are much bigger than their home countries (e.g., Switzerland). Yet top Obama administration officials refuse to change their opinions in the slightest; they have dug in behind the idea that they represent the moderate center on banking policy. This is a weak position; it is simply a myth with no factual basis – the people who pushed effectively for more reform over the past few months were the center, not the left, of the Democratic party. In the best profile to date of Tim Geithner, by John Heilemann in New York Magazine , even the Treasury Secretary himself expresses frustration with the biggest banks – calling them “the warlords”. “The irony here was rich, of course, since Geithner’s stabilization scheme would turn out be strikingly favorable to Wall Street. From the outset, his aim was never to punish the banks. Quite the contrary, it was to save them–by pouring money into them, restoring confidence in them, treating them with kid gloves. Nor was his goal to restructure the financial system. It was to prevent the existing system from collapsing and then strengthen the rules governing its operation. In all this, Geithner was betraying the extent to which he shared Wall Street’s mind-set, even if he wasn’t a creature of it. “His office was there and he was deeply enmeshed in that culture and he had those relationships,” says one of his best friends. “That part of the critique is fair.” David Brooks argued in the New York Times on Friday – writing about a different industry – that this is unavoidable, and perhaps normal: “Finally, people in the same field begin to think alike, whether they are in oversight roles or not. The oil industry’s capture of the Minerals Management Service is actually misleading because the agency was so appalling and corrupt. Cognitive capture is more common and harder to detect.” More specifically, however, it’s not that “people in the same field begin to think alike”, but rather that “people who are supposed to regulate” begin to see the world through the eyes of the biggest private sector players. Note, for example – and this is important – most hedge fund managers agree big banks are dangerous and will again mismanage risk in a reckless manner. And cognitive (or cultural) capture, as we argued last year in The Quiet Coup , runs deep in the financial system. Last year David Brooks rejected our argument ; it seems the graphic failures of big oil have further shifted the consensus. Geithner insists that, above all, he represents the reasonable center of responsible opinion, “I care about us passing [reform legislation] good and strong,” he tells me. “And my feeling is that you have to do this from the center.” But this is simply not a left-right issue (look at the blurbs and reviews for 13 Bankers ). This is regulatory capture, as laid out by George Stigler from the University of Chicago (a man of the right) – supersized by the increasing gap since 1980 in incomes between the regulated and the regulators (see Figure 2 in this paper , on p.29, by Thomas Ferguson and Robert Johnson). Mr. Geithner is no closer to a moderate, centrist view on the financial sector than Robert Rubin and Larry Summers were vis-à-vis derivatives (and financial deregulation more broadly) in the 1990s – as documented at length in 13 Bankers . The constraints on size, leverage, and activity of our largest banks could have been much stronger in the Senate bill (and presumably in the final legislation). Matt Taibbi has a good account of what was (and what could have been) and this is not denied by the administration ( speaking to John Heilemann ): ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’ (In case you missed it, Brown-Kaufman was an amendment to the main financial reform bill in the Senate; more detail here .) The people in charge of our strategy towards big banks are not fools and they are not corrupt; they are also not doing things just because someone on Wall Street calls them up. Our top policymakers are simply convinced that what is good for the biggest and most dangerous element on Wall Street is good for the American economy. This is cultural capture in its purest and most extreme form. It increasingly stands out as a problem both in the US context and around the world. Unfortunately, the White House and Treasury may be the last to realize this. Originally posted at the Baseline Scenario

Read the full article →

Simon Johnson: The Consensus on Big Banks Shifts, But Not at Treasury

May 30, 2010

Attitudes towards big banks are changing around the world and across the political spectrum. In the UK, the new center-right government is looking for ways to break them up : “We will take steps to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognizing that this will take time to get right, the commission will be given an initial time frame of one year to report.” The European Commission, among others, signals that a bank tax is coming ; presumably, as suggested by the IMF, this will have higher rates for bigger banks and for banks with less capital. And other European officials are increasingly worried by the lack of capital in German banks, by the recent reckless lending sprees in Ireland and Spain, and by the dangers posed by banks that are much bigger than their home countries (e.g., Switzerland). Yet top Obama administration officials refuse to change their opinions in the slightest; they have dug in behind the idea that they represent the moderate center on banking policy. This is a weak position; it is simply a myth with no factual basis – the people who pushed effectively for more reform over the past few months were the center, not the left, of the Democratic party. In the best profile to date of Tim Geithner, by John Heilemann in New York Magazine , even the Treasury Secretary himself expresses frustration with the biggest banks – calling them “the warlords”. “The irony here was rich, of course, since Geithner’s stabilization scheme would turn out be strikingly favorable to Wall Street. From the outset, his aim was never to punish the banks. Quite the contrary, it was to save them–by pouring money into them, restoring confidence in them, treating them with kid gloves. Nor was his goal to restructure the financial system. It was to prevent the existing system from collapsing and then strengthen the rules governing its operation. In all this, Geithner was betraying the extent to which he shared Wall Street’s mind-set, even if he wasn’t a creature of it. “His office was there and he was deeply enmeshed in that culture and he had those relationships,” says one of his best friends. “That part of the critique is fair.” David Brooks argued in the New York Times on Friday – writing about a different industry – that this is unavoidable, and perhaps normal: “Finally, people in the same field begin to think alike, whether they are in oversight roles or not. The oil industry’s capture of the Minerals Management Service is actually misleading because the agency was so appalling and corrupt. Cognitive capture is more common and harder to detect.” More specifically, however, it’s not that “people in the same field begin to think alike”, but rather that “people who are supposed to regulate” begin to see the world through the eyes of the biggest private sector players. Note, for example – and this is important – most hedge fund managers agree big banks are dangerous and will again mismanage risk in a reckless manner. And cognitive (or cultural) capture, as we argued last year in The Quiet Coup , runs deep in the financial system. Last year David Brooks rejected our argument ; it seems the graphic failures of big oil have further shifted the consensus. Geithner insists that, above all, he represents the reasonable center of responsible opinion, “I care about us passing [reform legislation] good and strong,” he tells me. “And my feeling is that you have to do this from the center.” But this is simply not a left-right issue (look at the blurbs and reviews for 13 Bankers ). This is regulatory capture, as laid out by George Stigler from the University of Chicago (a man of the right) – supersized by the increasing gap since 1980 in incomes between the regulated and the regulators (see Figure 2 in this paper , on p.29, by Thomas Ferguson and Robert Johnson). Mr. Geithner is no closer to a moderate, centrist view on the financial sector than Robert Rubin and Larry Summers were vis-à-vis derivatives (and financial deregulation more broadly) in the 1990s – as documented at length in 13 Bankers . The constraints on size, leverage, and activity of our largest banks could have been much stronger in the Senate bill (and presumably in the final legislation). Matt Taibbi has a good account of what was (and what could have been) and this is not denied by the administration ( speaking to John Heilemann ): ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’ (In case you missed it, Brown-Kaufman was an amendment to the main financial reform bill in the Senate; more detail here .) The people in charge of our strategy towards big banks are not fools and they are not corrupt; they are also not doing things just because someone on Wall Street calls them up. Our top policymakers are simply convinced that what is good for the biggest and most dangerous element on Wall Street is good for the American economy. This is cultural capture in its purest and most extreme form. It increasingly stands out as a problem both in the US context and around the world. Unfortunately, the White House and Treasury may be the last to realize this. Originally posted at the Baseline Scenario

Read the full article →

Whitman Holds 24-Point Lead in California Governor Primary, Poll Indicates

May 30, 2010

By William Selway and Dan Hart May 30 (Bloomberg) — Meg Whitman , the former EBay Inc. chief executive who’s seeking the Republican nomination to succeed Arnold Schwarzenegger as California’s governor, has a 24 percentage point lead over her rival less than two weeks before the first vote. Whitman led state Insurance Commissioner Steve Poizner , 53 percent to 29 percent in a survey released today by the Los Angeles Times. The June 8 primary will pick the party’s candidate for the November general election. The results show that Whitman, a billionaire who has spent $68 million on the race, has withstood advertisements focusing on her immigration views and on her past position as a Goldman Sachs Group Inc. director. The spots haven’t tipped the race in favor of Poizner, a Silicon Valley entrepreneur who sold his company to Qualcomm Inc. in 2000 for about $1.1 billion. Both of the candidates are 53. Whitman has parried accusations from Poizner’s campaign that she has profited from pornography, backed President Barack Obama ’s immigration amnesty plan and failed to vote in past elections. Democrats also have paid for ads highlighting Whitman’s role at Goldman Sachs, the Wall Street bank sued for fraud by the Securities and Exchange Commission in connection with the sale of mortgage-linked securities. Jerry Brown The winner of the Republican nomination will face off in November against Attorney General Jerry Brown , 72, the former two-term governor who is running without serious opposition for the Democratic nomination. Schwarzenegger, first elected in 2003, can’t run again because of term limits. Whitman still trails Brown in a head-to-head matchup by 44 percent to 38 percent, the L.A. Times poll said. In California, independent voters are allowed to vote in the Republican primary election. A poll released May 19 by the San Francisco-based Public Policy Institute of California said Whitman led Poizner 38 percent to 29 percent among likely primary voters, down from a 50 percentage-point lead she commanded in March. The contest for governor of the most-populous U.S. state is being waged as Schwarzenegger and the Democrat-led legislature disagree on ways to close a $19 billion budget deficit for the fiscal year that begins in July. Beset by revenue declines brought on by the recession, Schwarzenegger has proposed cutting deeper into spending, including eliminating the main welfare program for the poor. Democrats have backed tax increases. Both Whitman and Poizner have said they would address the budget crisis by cutting government spending and working to stoke job growth . Each has sought to make clear their differences on social issues. Illegal Immigration Poizner, elected insurance commissioner in 2006, has made illegal immigration a central issue. He seized on Whitman’s statement that she opposes a new law in Arizona that requires local police to determine the immigration status of people they come in contact with and who may be in the country without appropriate documentation. Whitman, a first-time candidate, says Poizner has failed to roll back the size of government during his time in office. She also highlighted his changing stance on California’s landmark global-warming law that business groups say will push companies and jobs out of the state. Poizner supported the law in 2006, though he now says he backs a ballot measure to suspend it. The survey released today by the state’s largest newspaper was based on responses by 1,506 registered voters and was conducted from May 19 to May 26. The sample has a margin of error of plus or minus 2.6 percentage points. To contact the reporters on this story: William Selway in San Francisco at wselway@bloomberg.net ; Dan Hart in Washington at dahart@bloomberg.net .

Read the full article →

Standard Chartered Raises $540 Million Selling Indian Depository Receipts

May 30, 2010

By Chitra Somayaji and V. Ramakrishnan May 31 (Bloomberg) — Standard Chartered Plc , the U.K. lender that makes at least three quarters of its profit in Asia, raised about 24.9 billion rupees ($540 million) from a sale of shares in India, the lower end of the proposed offering. The shares, which were offered to investors for 100 rupees to 115 rupees each last week, were sold for 104 rupees apiece, the bank said in an e-mailed statement yesterday. Standard Chartered had sought to raise as much as $750 million, according to comments by Finance Director Richard Meddings on May 13. The sale, which makes the London-based bank the first company to issue Indian depository receipts, was completed in the final hours of a four-day offer period as investors delayed their bids to avoid tying up capital under a rule that went into effect this month in India. The European debt crisis also made it more difficult for companies worldwide to sell stock. “The volatility in the global market could have influenced the pricing,” Vaibhav Sanghavi , who manages funds for wealthy individuals as a director at Ambit Capital Ltd., said in Mumbai. The rule requiring funds to deposit the full amount at the time of making the bid “could also have been another factor.” The lender received orders for 2.2 times the 204 million shares on offer as bourses closed on May 28, according to data from the National and Bombay stock exchanges. It agreed to sell an additional 36 million IDRs to so-called anchor investors earlier in the week at 104 rupees each. Trading Date The IDRs will begin trading on the Indian exchanges by June 11, the bank said yesterday. Standard Chartered, which is listed in Hong Kong and London, fell 2.7 percent to 1,637 pence on May 28 in the U.K. In Hong Kong, the stock rose 1.2 percent to HK$185.50. Ten IDRs will represent one share of Standard Chartered. The bank began the final day of its India sale with bids for 11 percent of the stock on offer. Indian and overseas funds are required to pay the full amount at the time of making their bid under a rule that came into effect this month, leading investors to delay the date of their offer to buy shares. Domestic insurers are also prohibited from taking part in the sale, limiting the number of buyers. UBS AG, Goldman Sachs Group Inc. , JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co. , SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. managed the sale. Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years. “The IDR listing will further build on our brand presence in India, one of our key markets,” Meddings said in the statement yesterday. To contact the reporter on this story: Chitra Somayaji in Mumbai at csomayaji@bloomberg.net ; V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net .

Read the full article →

China Property Bubble Bursts in Bond Market as Kaisa Drops Credit Markets

May 30, 2010

By Katrina Nicholas May 31 (Bloomberg) — Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating. Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd. , Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan. Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent rise in real estate prices in April from a year earlier spurred the state to increase regulation. “New issues by Chinese developers will stall for the time being,” Vince Chan , the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, a fixed-income advisory and brokerage firm founded by two former Citigroup Inc. bankers, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.” Widening Spreads The amount of dollar bonds issued by China developers represents 45 percent of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. The yield spread on $350 million of 13.5 percent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings Inc. prices on Bloomberg show. Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website . An investor who bought the company’s 2015 bonds at par would have lost 15.5 percent. Elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries widened 5 basis points last week to 193 basis points, or 1.93 percentage points, Bank of America Merrill Lynch index data show. The spread, which peaked at 511 on March 30, 2009, is up from this year’s low of 142 on April 21. Average yields rose to 4.06 percent, the highest based on weekly closes since the period ended March 5. Sales Slow Corporate bond issuance worldwide slowed this month to $66.1 billion, down from $183 billion in April and the least since December 2000, according to data compiled by Bloomberg. “Companies have to be prepared to strike and strike quickly,” Rick Martin, the London-based director of treasury at Virgin Media Inc. , the U.K.’s second-largest pay-television company, said at a May 28 briefing in London. “The key is to have the team ready and primed and able to pull the trigger at short notice. I can’t think of a time when the forces have been so polarizing.” The cost to insure U.S. corporate debt against default rose last week. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 25.1 basis points this month to a mid-price of 117.2 basis points. The index typically rises as investor confidence deteriorates and falls as it improves. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. Emerging Market In emerging markets, spreads narrowed 16 basis points last week to 321 basis points, trimming the monthly increase to 63, according to the JPMorgan Emerging Market Bond Index. China has added to regulations designed to cool the property market several times this year, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third- home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes. Goldman Sachs lowered its 2010 net income estimates for Chinese developers by an average 13 percent and reduced earnings forecasts for the next two years by 25 percent, analysts led by Yi Wang wrote in a May 19 report. Credit Suisse pared earnings- per-share estimates by as much as 15 percent for 2010 and 20 percent for 2011, citing the government’s clampdown. Demanding a ‘Premium’ “With the negative headlines coming out of this sector, investors are less likely to be drawn to participate in new issues because of a high coupon,” Tan Chew May , a credit analyst for Aberdeen Asset Management Asia Ltd., which oversees $1.5 billion of Asian dollar debt, said in a phone interview from Singapore. “With the trend of widening spreads, new names are forced to come at premium.” China property developers paid coupons as high as 14 percent to issue dollar debt this year, compared with an average 9.2 percent for other companies in Asia and 6.2 percent for U.S. property companies. On average, Chinese property companies are paying a 10.875 percent coupon. Glorious Property Holdings Ltd ., which has 26 real estate projects in cities including Shanghai, Beijing, Harbin and Changchun, postponed its first sale of dollar-denominated bonds in April. The Hong Kong-listed company cited poor credit market conditions for the delay. Renhe’s Delayed Sale Renhe Commercial Holdings Co ., a developer of underground shopping centers based in Harbin, China, sold five-year, 11.75 percent dollar notes on May 18 to yield 974 basis points more than Treasuries after delaying the sale for two weeks. The relatively strong finances of China developers means some companies can afford to pay double-digit coupons, according to Andy Mantel , Hong Kong-based founder of hedge fund manager Pacific Sun Investment Management Ltd. Country Garden , which builds villas, townhouses and apartments in China, sold bonds in April with an 11.25 percent coupon. The company, controlled by China’s second-richest woman, Yang Huiyan, said contracted revenue in the first quarter rose 82 percent on sales in the Guangdong area. “The sector is relatively better financed than it was two years ago when there were serious liquidity issues,” Mantel said in a phone interview. “Investors might not make any money on the actual bond, but they’ll get their interest payments.” Fantasia’s Coupon Fantasia Holdings Group Co .’s $120 million of five-year bonds pay the highest coupon at 14 percent. The company develops commercial and residential complexes in China’s Pearl River Delta and Chengdu-Chongqing Economic Zone regions. It raised HK$3.18 billion ($408 million) from an initial share sale in Hong Kong in November, boosting cash reserves to $497 million from a deficit, Bloomberg data show. “Sales and pre-sales have increased cash balances for most companies by over 20 to 30 percent while fresh debt issuance has extended maturity profiles,” analysts led by Raghav Bhandari at CreditSights Asia Research Ltd. wrote in a note to clients May 20. “Companies are in a much better position to handle this period of strain than they were a year ago.” “People are attracted by the high coupons of the sector, but are fearful of the regulatory announcements and how it might affect the credits,” Sean Henderson , head of Asia debt syndication at HSBC Holdings Plc., said in a phone interview from Hong Kong. “More recently, the overall market backdrop has taken the whole high-yield sector lower.” Widening Spreads The yield spread on speculative-grade company dollar bonds in Asia was 179 basis points this month as of May 27 compared with 57 basis points for investment-grade companies, JPMorgan indexes show. High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Credit-default swaps insuring against Country Garden defaulting on its debt rose 343 basis points to 10.39 percentage point this month through May 18. The contracts suggest investors are pricing in a 50 percent chance of default. Similar contracts insuring Agile’s debt have soared 3.85 percentage points since mid-April, when China’s central bank pledged to implement new lending rules to cool real estate “madness.” At current rates investors are pricing in a 48 percent chance of default. Chinese property bonds are unlikely “to recover meaningfully anytime soon,” Amias Berman’s Chan said. “If we start to see the regulatory measures taking effect in the next few months then there may be a reversal of fortunes. But optimistically I think it’ll be the third or fourth quarter before things stabilize.” To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

Read the full article →

LAMPERS Keeps INTECH On Watch

May 30, 2010

The trustees board of the Louisiana Municipal Police Employees Retirement System has decided to keep its investment manager on watch

Read the full article →

← Previous Entries

Next Entries →