philippines

El Nino May Cut Thai Rice Output, Boost Palm Oil Price as Drought Spreads

March 10, 2010

By Supunnabul Suwannakij March 11 (Bloomberg) — Rice production in Thailand, the world’s largest exporter, may decline as drier-than-normal weather curbs yields, adding to signs that an El Nino may be hurting farm output across the region. “Unmilled rice output in the next crop year may fall below the average production level of 31 million tons if El Nino puts off rainfall,” Prasert Gosalvitra , head of the nation’s Rice Department , said today by phone from Bangkok. Thailand accounts for about a third of the global trade in rice. Lower production of rice from Thailand and palm oil from Malaysia caused by the dry weather may drive commodity prices higher, spurring food inflation. Asian agricultural companies including Wilmar International Ltd. may benefit from the surge, BNP Paribas SA told investors in a note today. “We’re worried that delayed rainfall will probably hurt output,” Apichart Jongskul , secretary-general of Thailand’s Office of Agricultural Economics , said today by phone. “The impact on the next crop has yet to be evaluated,” Apichart said. Thai output of unmilled rice in the year that started Oct. 1 may be between 27 million and 29 million tons, said Apichart. That’s unchanged from a forecast on Jan. 13, and 15 percent lower than the previous year’s 31.7 million tons, he said. The El Nino weather phenomenon, characterized by warmer sea-surface temperatures across the equatorial Pacific, can cut rainfall in Asia. Among the expected impacts from this month to May are drier-than-average conditions over Indonesia, according to a March 4 report from the U.S. Climate Prediction Center. ‘Driest Period’ “It’s the driest period I’ve ever seen,” Virapan Tipsuna, a 42-year-old farmer in Thailand’s northeastern province of Nongkhai, said yesterday in an interview. “It is so dry that the water supply is not enough for rice farming.” Palm oil, about 90 percent of which is produced in Indonesia and Malaysia, may surge this year as the El Nino curbs yields, analysts and traders including Prudential Bache Commodities LLC and Godrej International Ltd. warned this week. The commodity, trading today at 2,700 ringgit ($813) a ton, may jump to 3,200 ringgit, Godrej’s Dorab Mistry forecast. “Mistry’s expectations are similar to our own thesis of an extended El Nino and lower” palm oil production, BNP’s Michael Greenall wrote in today’s note, including among his top picks Indonesia’s PT Astra Agro Lestari , that country’s largest publicly traded plantations company. Astra Agro stock has almost doubled in the past year. Drought Spreads Drought is spreading in 36 of Thailand’s 76 provinces, mostly in the North and Northeast, which are major planting areas of rice and sugar, according to a statement on the government’s Web site. Water in reservoirs that can be consumed has dropped 15 percent this year, according to the Royal Irrigation Department . The Mekong River, which flows from China through five countries in Southeast Asia, is at its lowest level in 30 years near Thailand’s border with Laos, Thailand’s Department of Water Resources said yesterday. A drought in southern China, including Yunnan province, has left rivers at record lows, the Ministry of Water Resources said yesterday. Dry weather from El Nino has damaged 200,000 tons of rice in the Philippines, the world’s largest importer, Agriculture Secretary Bernie Fondevilla said on the same day. In Thailand’s Northeast, the water shortage, coupled with plant infestations, has damaged half of the rice crop, said Virapan, the farmer. “We just hope that it will rain soon and we don’t have to suffer again next year.” To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

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Philippines May Keep Benchmark Rate at 4%, Unwind More Stimulus Measures

March 9, 2010

By Karl Lester M. Yap and Michael Munoz March 10 (Bloomberg) — The Philippine central bank will probably keep borrowing costs at a record low to support the country’s recovery even as it prepares to drain excess cash from the economy. Bangko Sentral ng Pilipinas will keep its benchmark interest rate at 4 percent for a sixth straight meeting tomorrow, according to all 15 economists surveyed by Bloomberg News. Policy makers will consider measures including reducing the budget for the so-called rediscounting window, a facility that allows lenders to borrow from the central bank, Deputy Governor Diwa Guinigundo said this week. “The central bank cannot raise interest rates because recovery is still nascent and needs to be nurtured,” said Marcelo Ayes , a senior vice president at Rizal Commercial Banking Corp. in Manila. “But they have to show they are on top of inflation and may decide to cut the rediscounting budget.” Asian nations from China to Malaysia have started pulling back monetary stimulus as growth accelerates and inflation returns. Bangko Sentral raised the interest rate for the rediscounting facility earlier this year, and Guinigundo said March 8 there are reasons to review “crisis intervention measures” put in place during the global financial turmoil. Benchmark four-year bond yields dropped to a three-month low yesterday on optimism borrowing costs will remain low. The Philippine peso rose to its strongest level in more than a month as Asia’s rebound attracts funds to the region’s assets. Growth Recovers Philippine economic growth accelerated to a one-year high of 1.8 percent last quarter from a decade-low 0.4 percent in the previous three months, lifting prospects for the country’s property and food companies. Jollibee Foods Corp ., the fast-food chain that outsells McDonald’s Corp. in the Philippines, is looking forward “to a more robust growth in 2010,” the company said last month. The government forecasts the economy will expand 2.6 percent to 3.6 percent in 2010, as President Gloria Arroyo , whose term ends this June, increases outlays on airports, bridges and state programs to a record 1.54 trillion pesos ($34 billion) this year to bolster growth. Policy makers will review all measures put in place to counter the global crisis now that financial markets have improved, Guinigundo said this week. The rediscounting window allows lenders to borrow from the central bank using loans as collateral. Cheap Money “The rediscounting facility is unnecessary cheap money especially since financial markets have stabilized,” Ayes said. Low interest rates in the U.S. and Europe and faster growth in Asia are spurring capital flows into the region, prompting China to start draining excess cash from the economy to prevent asset bubbles. Australia and Vietnam have raised borrowing costs as inflation accelerates, and Malaysia last week increased its overnight policy rate, saying it wants to avoid “financial imbalances”. Bangko Sentral forecasts inflation may slow to a range of 3.4 percent to 3.5 percent in 2011 from an estimated 4 percent this year, Guinigundo said. Consumer-price gains in the Philippines eased for a second month in February to 4.2 percent. The Philippines’ benchmark interest rate is at the lowest level since central bank data started in 1990. Easing inflation last year allowed Bangko Sentral to slash the overnight borrowing rate by 2 percentage points from December 2008 to July 2009 to support economic growth as exports collapsed. Policy makers also reduced the proportion of cash banks need to set aside as reserves and raised the amount of money available for loans to local lenders in late 2008. To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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Spam Maker Hormel Seeks China Growth Through Takeover or Venture, CEO Says

March 5, 2010

By Mark Clothier and Matthew Boyle March 5 (Bloomberg) — Hormel Foods Corp. , the maker of Spam lunchmeat, wants to expand in China with an acquisition or a joint venture, Chief Executive Officer Jeffrey Ettinger said. “We are at the higher end of the Chinese market, with more ex-pat appeal,” Ettinger, 51, said in an interview yesterday in New York. “We would like to get more into the mid-tier markets.” Hormel , based in Austin, Minnesota, has had joint ventures in China since 1994 and now generates $47 million in annual sales there. Non-U.S. revenue was $334.9 million in fiscal 2009, about 5 percent of the company’s total. Hormel owns a research- and-development unit in Shanghai, and jointly operates plants in Shanghai and Beijing. “Our preference would be to get involved in a joint venture or through an acquisition, as we question our ability to create a brand on our own that will be seen as local,” Ettinger said. Hormel sells products under the Spam and Hormel brands in China. Its meat packaging there features a green background, which signifies freshness to Chinese consumers, according to Robert C. Wahlert , a Hormel business-development manager. The CEO said he would be willing to spend as much as $1.5 billion on a transaction, more than deals he has done before, which have ranged from $40 million to $350 million. Hormel had $449.1 million in cash and equivalents as of Jan. 24, according to a company report. “We would be willing to borrow at least a billion,” he said. “If it was the right thing, we could do it.” Minority Stakes Hormel operates outside the U.S. mostly through joint ventures and has minority ownership of food businesses in Mexico, the Philippines and Vietnam, according to its annual report. One member of the company’s five-person business development team is based in Asia, Ettinger said. International sales growth outpaced U.S. growth in 2007 and 2008. Both segments declined at about the same rate in 2009. Hormel rose 4 cents to $41.84 at 4:15 p.m. in New York Stock Exchange composite trading . The shares have gained 8.8 percent this year. To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net ; Matthew Boyle in New York at mboyle20@bloomberg.net

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China Mobile Drops as Investors Question Plans to Take Pudong Bank Stake

March 3, 2010

By Mark Lee March 4 (Bloomberg) — China Mobile Ltd. shares fell in Hong Kong trading on concern the world’s biggest phone company by value is deviating from its main business by considering an investment in Shanghai Pudong Development Bank Co. China Mobile lost 2.2 percent to HK$73 on the city’s stock exchange in early trading, compared with a 0.6 percent rise on the benchmark Hang Seng Index. “It doesn’t make sense for the management to be using funds this way,” said Bertram Lai , who rates China Mobile shares “neutral” at CIMB-GK Securities in Hong Kong. “They should be returning it to shareholders.” China Mobile Chairman Wang Jianzhou said yesterday the possible investment in Pudong Bank will help the carrier build its electronic commerce business and lift earnings as mounting competition slows profit growth. The transaction would help replenish capital at the Shanghai-based lender after Chinese banks extended a record 9.59 trillion yuan ($1.4 trillion) of credit last year. “You don’t need to buy a bank to get into mobile banking. They should just stick to what they do,” said Christopher Wong , a fund manager at Aberdeen Asset Management, which manages $45 billion of assets, including China Mobile shares, in the Asia excluding Japan region. “We’ll be disappointed if this goes through. This is not what they do.” Pudong Bank, part-owned by Citigroup Inc., said yesterday in a Shanghai stock exchange filing that talks on a possible investment by China Mobile are under way. Wang said a deal will lift China Mobile’s earnings per share as support from a financial firm helps it expand in e-commerce, a market dominated domestically by Alibaba Group Holding Ltd. Trading Halted China Mobile, which had 256 billion yuan of cash at the end of June according to its interim earnings report, may buy 2.2 billion Pudong Bank shares for 17.82 yuan apiece, Guotai Junan Securities Co. analyst Wu Yonggang wrote in a note last week, without citing anyone. That’s 14 percent lower than the stock’s closing price before trading was halted on Feb. 26 pending an announcement about a strategic investment. China Mobile fell 2.4 percent to HK$74.65 yesterday in Hong Kong before the company’s official announcement of the talks, underperforming the benchmark Hang Seng Index for a fourth consecutive session. The phone carrier, with a market capitalization of HK$1.5 trillion ($193.2 billion) as of yesterday, hired China International Capital Corp. as its financial adviser, two people involved in the talks said, asking not to be identified because of confidentiality agreements. Underperforming Shares “Any investment will help increase our earnings per share,” China Mobile’s Wang told reporters in Hong Kong yesterday during a teleconference from Beijing. The carrier needs “deep support” from a financial firm to develop its electronic commerce and payment business, he said. Alipay, owned by Hangzhou, east China-based Alibaba Group , controls almost 60 percent of China’s online-payment market, according to its Web site. Chinese consumers bought more than 180 billion yuan of goods and services on the Internet last year, according to Fang Meiqin, research director at BDA China Ltd, a Beijing-based telecommunications industry consultant. The value of e-commerce transactions settled using mobile handsets will probably increase to more than 7 billion yuan by 2013, according to BDA. “It will become much more convenient for China Mobile to offer electronic payment services if they have an alliance with a bank,” said Fang. “In China, technology companies don’t have the necessary licenses to offer financial services.” A deal with Pudong Bank wouldn’t undermine China Mobile’s ability to partner with other lenders, Wang said. Calling the Shots “I don’t know what strategically that would provide to China Mobile,” CIMB’s Lai said. “As the leading player in the market, they can theoretically call the shots and partner with anybody.” China Mobile wouldn’t be alone in investing in financial firms. South Korea’s SK Telecom Co . last year agreed to buy a stake in Hana Financial Group Inc.’s credit-card unit for 400 billion won ($349 million), while Globe Telecom Inc. in the Philippines agreed to buy 40 percent of BPI-Globe BanKO Savings Bank in 2008. Nokia Oyj , the world’s biggest maker of mobile phones, last year bought a minority stake in Obopay, a supplier of mobile banking services in the U.S. and India. China Mobile started allowing some users to pay bills with their handsets last year, and began providing other services such as mobile television and electronic readers, Chairman Wang said in November. The company is expanding its range of value- added services as competition intensifies with rivals China Telecom Corp. and China Unicom (Hong Kong) Ltd. Stimulus Package Pudong Bank, with 491 outlets nationwide, is seeking to boost financial strength after expanding loans by 30 percent in the first nine months of last year to support China’s 4 trillion yuan economic stimulus package . The Shanghai-based lender in September raised 15 billion yuan in a private placement to ensure it has enough capital to meet loan demand and regulatory requirements. China Mobile Communications, which owns 74 percent of Hong Kong-listed China Mobile, bought a 19.9 percent stake in Phoenix Satellite Television Holdings Ltd. in 2006. A year later, the phone company acquired Paktel Ltd., a wireless carrier in Pakistan, its first purchase outside Chinese territories. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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China Mobile in Talks to Buy Pudong Bank Stake to Expand Payment Service

March 3, 2010

By Mark Lee March 3 (Bloomberg) — China Mobile Ltd. is in talks to buy a stake in Shanghai Pudong Development Bank Co. to accelerate development of electronic-payment services for the world’s largest phone market. Details will be disclosed should both sides reach an agreement, China Mobile said in a statement to the Hong Kong stock exchange today. The world’s largest phone operator by subscribers hired China International Capital Corp. as its financial adviser, two people involved in the talks said, asking not to be identified because of confidentiality agreements. A tie-up with Pudong Bank may help China Mobile, estimated by Guotai Junan Securities Co. to be seeking a 20 percent stake for about $5.9 billion, gain users from a rival payment service offered by Alibaba Group Holding Ltd. An investment would help replenish capital at Pudong Bank after Chinese lenders extended a record 9.59 trillion yuan ($1.4 trillion) of credit last year. “It will become much more convenient for China Mobile to offer electronic payment services if they have an alliance with a bank,” said Fang Meiqin, research director at BDA China Ltd, a Beijing-based telecommunications industry consultant. “In China, technology companies don’t have the necessary licenses to offer financial services.” China Mobile, which had 256 billion yuan of cash at the end of June, according to its interim report in August, may buy 2.2 billion Pudong Bank shares for 17.82 yuan apiece, Guotai analyst Wu Yonggang wrote in a note last week, without citing anyone. That’s 14 percent lower than Pudong Bank’s price before the stock was halted from trading on Feb. 26 pending the announcement of strategic investors. Underperforming Shares China Mobile fell 2.4 percent to HK$74.65 before the announcement today, underperforming the benchmark Hang Seng Index for a fourth consecutive session. “For something as big as this, I can’t comment now,” China Mobile Chairman Wang Jianzhou said in Beijing at a meeting of the advisory body to the nation’s legislature today. Shanghai Pudong Bank confirmed in a separate filing it is in talks with China Mobile regarding the share sale. Gao Xia, a spokeswoman for the lender, declined to comment when asked for more details. China Mobile wouldn’t be alone in investing in financial firms. South Korea’s SK Telecom Co . last year agreed to buy a stake in Hana Financial Group Inc.’s credit-card unit for 400 billion won ($349 million), while Globe Telecom Inc. in the Philippines agreed to buy 40 percent of BPI-Globe BanKO Savings Bank in 2008. Nokia Oyj , the world’s biggest maker of mobile phones, last year bought a minority stake in Obopay, a supplier of mobile banking services in the U.S. and India. Alibaba China Mobile started allowing some users to pay bills with their handsets last year, and began providing other new services such as mobile television and electronic readers, China Mobile’s Wang said in November. The company is expanding its range of value-added services as competition intensifies with rivals China Telecom Corp. and China Unicom (Hong Kong) Ltd. Alipay, owned by Hangzhou, east China-based Alibaba Group , controls almost 60 percent of China’s online-payment market, according to its Web site. Chinese consumers bought more than 180 billion yuan of goods and services on the Internet last year, according to BDA’s Fang. E-commerce transactions settled using mobile handsets will probably increase to more than 7 billion yuan by 2013, according to BDA. Pudong Bank, with 491 outlets nationwide, is seeking to boost financial strength after expanding loans by 30 percent in the first nine months last year to support China’s 4 trillion yuan economic stimulus package . Pudong Bank in September raised 15 billion yuan in a private placement to ensure it has enough capital to meet loan demand and regulatory requirements. China Mobile Communications, which owns 74 percent of Hong Kong-listed China Mobile, bought a 19.9 percent stake in Phoenix Satellite Television Holdings Ltd. in 2006. A year later, the phone company acquired Paktel Ltd., a wireless carrier in Pakistan, for its first purchase outside Chinese territories. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Attack in Philippines killed 13

March 1, 2010

Attack in Philippines killed 13

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Japan Orders Massive Coastal Evacuations as Tsunami Approaches Shorelines

February 27, 2010

By Finbarr Flynn Feb. 28 (Bloomberg) — Japanese authorities told more than 150,000 people to evacuate coastal areas after warning of tsunami surges as high as 3 meters (10 feet) following the 8.8-magnitude earthquake in Chile. Residents near the shorelines of northern prefectures Aomori, Miyagi and Iwate need to prepare for a tsunami that may hit at about 1:30 p.m. local time, the Meteorological Agency said on the government’s Web site. A surge as high as 2 meters may hit other areas along Japan’s Pacific coast from Hokkaido in the north to Kyushu in the south, it said. Japan issued its first large-scale tsunami warning since 1993 after one wave on the Hawaiian island of Maui measured 3.2 feet. Tsunami alerts have also been issued for the U.S. and Canadian west coasts, as well as for the Pacific regions of Russia, and the Philippines, according to meteorological reports. The U.S. National Weather Service lifted its tsunami warning for Hawaii. The U.S. and Canadian west coasts remain under an advisory, which means currents may be hazardous for swimmers, boats and nearby structures though significant, widespread inundation isn’t expected. The death toll from Chile’s quake yesterday exceeds 300, Carmen Fernandez, director of the country’s national emergency agency, told TVN. The pre-dawn quake was centered 200 miles (317 kilometers) southwest of the capital Santiago near the main winemaking region and close to Concepcion, a metropolitan region of over 500,000 people. Japanese Prime Minister Yukio Hatoyama has set up an emergency taskforce to monitor the tsunami at his office, Hirofumi Hirano , the government’s spokesman, said on public broadcaster NHK today. Iwate officials have ordered evacuation of some 80,000 coastal residents, while more than 40,000 in neighboring Aomori and some 35,000 in Miyagi have been urged to flee shorelines, the national broadcaster said. To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

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Tsunami Hits Hawaii With No Reported Damage, Pacific Still Under Warning

February 27, 2010

By Alan Bjerga Feb. 27 (Bloomberg) — The western Pacific remains under tsunami warnings after ocean surges generated by an 8.8- magnitude earthquake in Chile reached Hawaii, according to the National Weather Service’s Pacific Tsunami Warning Center. Tsunami alerts for the U.S. and Canadian west coasts and Alaska remain in effect. There were no immediate reports of damage except for navigational buoys in Ventura, California. One wave on the Hawaiian island of Maui measured 3.2 feet, while the biggest wave measured so far was 7.7 feet in Talcahuano, Chile. Tsunamis have also been observed elsewhere along the Pacific rim, including in Chile, American Samoa, and Santa Monica, California, according to the Weather Service. Australia, New Zealand, Japan, Indonesia and the Philippines remain under tsunami warnings. President Barack Obama urged U.S. citizens in areas that might be affected “to listen closely to the instructions of local officials, who will have the full support of the federal government as they prepare for a potential tsunami and recover from any damage that may be caused.” Sirens in Hawaii In Hawaii, residents were warned by sirens. The U.S. Coast Guard closed all commercial ports to incoming traffic in Hawaii and encouraged all seaworthy vessels to evacuate, according to a statement. Coast Guard rescue crews were prepared to provide “post-tsunami support,” the statement said. The U.S. Navy in Hawaii ordered four warships to sea, out of Pearl Harbor, to avoid tsunami damage, CNN reported, citing unidentified Pentagon officials. Shoppers started coming in to the Foodland Super Market Ltd. store in Honolulu about 1:30 a.m. local time and it was filled with customers buying toiletries, water and food items, store manager Ed Treschuk. “We are very, very busy,” Treschuk said in a telephone interview. “People are buying whatever they need for the next day or two.” Coasts Under Advisory The U.S. and Canadian west coasts are under an advisory, which means that while significant, widespread inundation is not expected, currents may be hazardous for swimmers, boats and nearby structures. The Federal Emergency Management Agency and the Department of Homeland Security “are closely monitoring the situation, and officials are in close contact with the State of Hawaii and the U.S. territories in the Pacific Ocean that could be impacted by a potential tsunami,” FEMA Administrator Craig Fugate said in a statement earlier today. The largest waves in Alaska, as high as 2.3 feet, were expected at Kodiak Island, and could cause dangerous currents, Bill Knight, the tsunami warning and science officer at the West Coast and Alaska Tsunami Warning Center in Palmer, Alaska, said in a phone interview. “We’re not expecting the wave to chase people up hills, but residents should still be careful,” said Knight. ‘Normal Saturday’ Reached over the phone in Kodiak, Mike Murray, the manager of a Safeway grocery store, said that he hadn’t noticed an increase in customer concern. “It’s just a normal Saturday,” he said. An evacuation of Easter Island was ordered, Chilean President Michelle Bachelet said. Residents on the Pacific Ocean island, 2,180 miles (3,510 kilometers) west of the South American mainland, were later told by the Chilean navy that the threat of a tsunami had eased. Tourists on Ecuador’s Galapagos Islands moved to high ground following the earthquake, according to the Los Angeles Times . A weak tsunami struck French Polynesia in the south Pacific without causing “notable” damage, Agence France-Presse reported. South America, Australia, New Zealand, Japan, the Philippines, Russia and islands ranging from Peru to Japan may experience damage, according to a separate agency warning . The quake was centered 200 miles (317 kilometers) southwest of Santiago near the main winemaking region. At least 122 people have been killed, Chilean President-elect Sebastian Pinera told reporters in Santiago. To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

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Chile Hit by Magnitude 8.8 Earthquake, at Least 78 Dead; Tsunami Threatens

February 27, 2010

By Mike Millard and Paul Tobin Feb. 27 (Bloomberg) — Tsunami warnings have been issued across the Pacific Ocean after an 8.8-magnitude earthquake struck Chile, where President Michele Bachelet declared a “state of catastrophe.” The quake was centered 200 miles (317 kilometers) southwest of Santiago near the main winemaking region. At least 78 people have been killed, Bachelet told reporters. Tsunami warnings have been issued across the Pacific region, including South America, Australia, New Zealand, Japan, the Philippines, Russia and many islands, including Hawaii where the Pacific Tsunami Warning Centre said “urgent action should be taken to protect lives and property.” An evacuation of Easter Island has been ordered due to the tsunami threat, the British Broadcasting Corp. reported, citing Bachelet. The temblor struck at 3:34 a.m. offshore from the province of Maule at a depth of 22 miles (35 kilometers), according to the U.S. Geological Survey Web site . In the aftermath of the 90- second quake, the USGS reported 19 aftershocks, of which five measured 6.0 or above. “Amid such a major earthquake we can’t rule out that the death toll will rise,” Bachelet told televised news conference. “We will provide information as soon as we have it.” Copper Mine Power and phone connections were disrupted and Santiago residents waited in the street amid fears of aftershocks, pictures on CNN+ showed. The quake’s focus was 70 miles north of Concepcion, Chile’s second city, close to the vineyards of the Curico valley. While the world’s largest underground copper mine, El Teniente, is 180 miles from the epicenter, most of the country’s copper deposits are at least 500 miles to the north. “I’m trying to get in touch with Santiago,” said Gonzalo Cuadra , a London-based executive at Codelco, the world’s biggest copper producer and the owner of El Teniente. “I think in the north there haven’t been problems. We have to see what happened with the mines near Santiago.” The El Teniente underground copper mine, which is in central Chile, wasn’t damaged, Carmen Fernandez, head of the national emergency office, said in an interview in Santiago. Rio Tinto Group, a shareholder in the world’s largest copper mine, Escondida, located in northern Chile and owned by BHP Billiton Ltd., also had no reports of damage, London-based spokeswoman said Christina Mills said by telephone. State of Emergency A state of emergency was declared in Maule and the province of BioBio to the south, where Concepcion is located. A third region, Araucania, south of BioBio and the center of the country’s forestry industry, may also be added, Bachelet said. Some of the worst damage was around the cities of Talca, Curico and Cauquenes, near the quake’s epicenter, according to ONEMI, the national emergency agency. In downtown Santiago, rescue workers pulled a 92-year-old woman out of a home that had been reduced to a pile of rubble, TVN reported. The city’s international airport will be closed for at least 24 hours because of damage, airport chief Eduardo del Canto told the broadcaster. “The terminal is completely inoperable,” he said. Sections of the Panamerican Highway south of Santiago were blocked after pedestrian overpasses and a bridge collapsed, according to TVN images. Elsewhere, numerous pedestrian highway overpasses collapsed, Bachelet told reporters. ‘Some Damage’ “This is a major, damaging earthquake,” Randy Baldwin of the USGS told the BBC in an interview. “For any population in the area it would be reasonable to expect some damage.” Chile was struck by the most powerful earthquake on record in 1960, when a magnitude 9.5 temblor killed about 1,655 people, according to the USGS Web site. A further 211 people died when associated tsunamis struck Hawaii, Japan and the Philippines. Earlier today, a magnitude 7 earthquake hit near Okinawa, Japan, at about 5:31 a.m. local time, the USGS said. Last month, Haiti was struck by a magnitude 7 quake. The death toll may reach 300,000, President Rene Preval said Feb. 21. More than 1 million people were left homeless. To contact the reporters on this story: Mike Millard in Singapore at Mmillard2@bloomberg.net ; Paul Tobin in Madrid at ptobin@bloomberg.net

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Thailand to Seize $1.4 Billion From Ex-Premier Thaksin for Abuse of Power

February 26, 2010

By Daniel Ten Kate and Anuchit Nguyen Feb. 27 (Bloomberg) — A Thai court seized about 60 percent of ex-leader Thaksin Shinawatra’s fortune frozen by the military after a 2006 coup, a decision that may bring a respite from political fights that have deterred investors for four years. Nine Supreme Court judges ruled to seize 46.4 billion baht ($1.4 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Singapore’s Temasek Holdings Pte. The court will return 30.2 billion baht to Thaksin’s family, the judges said in a statement late yesterday. The ruling may placate both Thaksin’s supporters and opponents who disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Protests from the two sides have led to airport blockades, rioting and bombings since the coup that ousted Thaksin. “It’s a compromise solution, probably the best solution among all,” said Kongkiat Opaswongkarn , chief executive officer of Asia Plus Securities Pcl in Bangkok. “The splits in society cannot be solved in a day but at least people can take a break for the time being.” Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Prime Minister Abhisit Vejjajiva took power in December 2008 after a court dissolved the pro-Thaksin party that won an election the previous year. Thaksin’s red-shirted supporters aim to gather as many as 1 million people in Bangkok starting from March 12 to push for a fresh election. ‘Politically Motivated’ Thaksin said the ruling was “100-percent politically motivated” and urged his supporters to continue their fight against the government. “I urge all of my supporters to be calm and patient,” he said from Dubai, his home for most of the time since fleeing a two-year prison sentence in 2008. He had denied all the allegations against him. “Don’t give up. Continue to fight. Use your patience to fight for democracy and justice.” Thaksin and his allies have won the past four elections on heavy support from the northeast, Thailand’s poorest region and home to a third of its 66 million people. Abhisit said Feb. 5 his ruling Democrat party, which hasn’t won an election since 1992, may win half of the country’s parliamentary seats in the next nationwide vote, which must take place by the end of 2011. Boost for Stocks The ruling may boost Thai stocks, which trade at 10.9 times 2010 earnings, the third-cheapest in Asia. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam this year. “The market will rise as political tension has eased,” said Prapas Tonpibulsak , chief investment officer at Ayudhya Fund Management, who said the SET index may gain as much as 18 percent above today’s close this year. “Upside will probably be limited as conflicts remain.” Foreign investors, net sellers of $98 million of Thai stocks this year, bought a net $58 million on Feb. 25, the most since Oct. 9, according to stock exchange data. The baht gained on optimism an economic recovery is gathering pace after industrial production rose for a fifth straight month in January. After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin said he transferred his Shin stake to his children and relatives before taking office in 2001, an argument the court rejected. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. Royalty Payments, Myanmar Loan The court said Thaksin benefited Shin-controlled companies by changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin has 30 days to appeal the ruling if he can find new evidence in the case. He will “keep all options open,” Noppadon Pattama , a former foreign minister and a member of Thaksin’s legal team, said before the verdict. Around the region, Indonesia and the Philippines previously attempted to recover assets from deceased dictators Suharto and Ferdinand Marcos . The pair embezzled as much as $45 billion between them, according to a 2007 United Nations report . “The amount of money to be confiscated was considered from the additional fortune that he made from the abuse of authority,” the court said in a statement. Thaksin could retain the value of his family’s Shin stake before he became prime minister, it said. Tracking the SET Index Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. “Whether Thaksin used his influence to benefit his companies is for the courts to decide,” said Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the nation’s biggest brokerage by trading volume. “We analyze the stocks on fundamentals and price movements and based on past performance versus the SET it appears his companies performed no better than others in the benchmark.” To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ;

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Thai Police Deployed as Courts Mull Seizing $2.3 Billion Thaksin Fortune

February 25, 2010

By Daniel Ten Kate Feb. 26 (Bloomberg) — Thai police manned checkpoints near strategic locations in Bangkok as a court prepares to rule later today whether the government can seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family. The verdict from nine Supreme Court judges will conclude a case that began after the army ousted Thaksin in 2006, sparking a power struggle that may shape how the country is governed. Rival camps disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Police added reinforcements around the court, Parliament and Prime Minister Abhisit Vejjajiva ’s offices, the site of violent street protests from both sides in the past two years. The political turmoil has weighed on Thai stocks, which trade at 10.8 times 2010 earnings, the third-cheapest in Asia. “There are so many moving parts here that you’d have to be a very brave investor” to put money in Thailand at the moment, said Sriyan Pietersz , head of research for JPMorgan Chase & Co. in Bangkok. “Foreign investors will want to scope it out and see how the politics goes over the next couple of months.” So far this year, foreigners have been net sellers of $156 million of Thai stocks, the second-most in Asia after Taiwan, according to data compiled by Bloomberg. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam in that time. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.32 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. Judges will start reading the verdict at 1:30 p.m. local time. More Protests Planned Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Anti-government protesters, who wear red shirts and support Thaksin, plan to rally in Bangkok starting from March 12 to push for a fresh election. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin party that won a 2007 election, citing a clause in the constitution drafted after the coup. An election must be called by the end of next year. “Thaksin was very successful at reaching out to the poor in his first election,” Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the biggest brokerage by trading volume, wrote in a Feb. 24 report. “So this dispute is not likely to go away even if the red-shirts lose Thaksin because of an inability to fund supporters.” Advanced Info, Thaicom After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin transferred his Shin stake to his children and relatives before taking office in 2001. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. The Attorney-General says Thaksin concealed ownership of his stake in Shin during his five years as prime minister and used his position to increase the value of its holdings. He stands accused of changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin denies all allegations, according to Noppadon Pattama , a former foreign minister who is part of his legal team. Thaksin plans to watch the verdict from Dubai, where he has lived most of the time since fleeing Thailand in 2008 to avoid a two-year jail sentence for corruption. Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Thai Police Deployed as Courts Mull Seizing $2.3 Billion Thaksin Fortune

February 25, 2010

By Daniel Ten Kate Feb. 26 (Bloomberg) — Thai police manned checkpoints near strategic locations in Bangkok as a court prepares to rule later today whether the government can seize about $2.32 billion from fugitive Prime Minister Thaksin Shinawatra ’s family. The verdict from nine Supreme Court judges will conclude a case that began after the army ousted Thaksin in 2006, sparking a power struggle that may shape how the country is governed. Rival camps disagree on how much authority appointed soldiers, judges and royal advisers should wield over elected politicians. Police added reinforcements around the court, Parliament and Prime Minister Abhisit Vejjajiva ’s offices, the site of violent street protests from both sides in the past two years. The political turmoil has weighed on Thai stocks, which trade at 10.8 times 2010 earnings, the third-cheapest in Asia. “There are so many moving parts here that you’d have to be a very brave investor” to put money in Thailand at the moment, said Sriyan Pietersz , head of research for JPMorgan Chase & Co. in Bangkok. “Foreign investors will want to scope it out and see how the politics goes over the next couple of months.” So far this year, foreigners have been net sellers of $156 million of Thai stocks, the second-most in Asia after Taiwan, according to data compiled by Bloomberg. Thailand’s SET Index has lagged benchmarks in Indonesia, Malaysia, the Philippines and Vietnam in that time. Prosecutors are seeking to confiscate the 76.6 billion baht ($2.32 billion) that Thaksin’s children and relatives earned from the 2006 sale of holding company Shin Corp. to Temasek Holdings Pte, Singapore’s state-owned investment firm. Judges will start reading the verdict at 1:30 p.m. local time. More Protests Planned Since the coup, courts have disbanded parties linked to Thaksin that won the past two elections. The rulings have eroded confidence in the judicial system among Thaksin’s supporters, who say different standards are applied to opponents who seized the prime minister’s offices and the airports two years ago. Prosecutors have yet to bring those cases to trial. Anti-government protesters, who wear red shirts and support Thaksin, plan to rally in Bangkok starting from March 12 to push for a fresh election. Abhisit took power in December 2008 after a court dissolved the pro-Thaksin party that won a 2007 election, citing a clause in the constitution drafted after the coup. An election must be called by the end of next year. “Thaksin was very successful at reaching out to the poor in his first election,” Vikas Kawatra , head of institutional broking at Kim Eng Securities (Thailand) Pcl, the biggest brokerage by trading volume, wrote in a Feb. 24 report. “So this dispute is not likely to go away even if the red-shirts lose Thaksin because of an inability to fund supporters.” Advanced Info, Thaicom After Thaksin founded Shin Corp. in 1983, its units were awarded one of two mobile-phone concessions and an exclusive satellite franchise. The company controls Advanced Info Service Pcl , Thailand’s top mobile-phone operator, and satellite services monopoly Thaicom Pcl . Thaksin transferred his Shin stake to his children and relatives before taking office in 2001. Seven years earlier he disclosed that he was worth 60 billion baht — about $2.4 billion at the time. The Attorney-General says Thaksin concealed ownership of his stake in Shin during his five years as prime minister and used his position to increase the value of its holdings. He stands accused of changing Advanced Info’s royalty payments to the state-owned telecoms operator and approving a government loan to Myanmar, part of which was used to buy equipment from Thaicom. Thaksin denies all allegations, according to Noppadon Pattama , a former foreign minister who is part of his legal team. Thaksin plans to watch the verdict from Dubai, where he has lived most of the time since fleeing Thailand in 2008 to avoid a two-year jail sentence for corruption. Shin shares gained 121 percent from when Thaksin took office on Feb. 9, 2001, to when his family sold the company on Jan. 23, 2006, compared with a 128 percent gain in the benchmark SET index, according to data compiled by Bloomberg. Siam Cement Pcl , Thailand’s fourth-biggest company, which is controlled by the monarchy’s investment arm, gained 717 percent in that time. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Bill Gross Clone Might Tame China’s Inflation: William Pesek

February 18, 2010

Commentary by William Pesek Feb. 18 (Bloomberg) — Jim O’Neill is on the lookout for the great Chinese revaluation of 2010, and he’s not alone. “Something’s brewing,” Goldman Sachs Group Inc. ’s London- based chief economist told Bloomberg News. “It could happen anytime.” China’s first major increase in the value of the yuan in almost five years would cool price pressures in an economy some think will grow more than 11 percent this year. Overheating risks abound and efforts to restrain credit growth aren’t working. As this inflation fight accelerates, China is finding that it could use its own Bill Gross . China will soon be the second-biggest economy, yet its lack of a large and developed bond market is a big liability. As Beijing tries to tighten credit, it’s doing so without a primetime infrastructure of investors and dealers to help transmit policy moves to the broader economy. That’s where the absence of Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co ., and his ilk hurts the most. When China’s central bank raises interest rates, the lack of a sophisticated secondary market dampens the effect. In a sense, the People’s Bank of China lacks the people to influence monetary conditions. Federal Reserve Chairman Ben S. Bernanke altering rates in Washington means little unless bond dealers in New York, London and Tokyo act accordingly in the secondary market. It’s that multiplier effect that makes monetary policy so powerful, and China doesn’t have it. Market Development Granted, China has made progress. In April 2008 the government made it easier for companies to sell debt maturing in three to five years. It reduced an over-reliance on bank loans, cutting risks in the financial system. To strategists like Frances Cheung of Standard Chartered Plc in Hong Kong, the step was a “milestone.” Corporate-debt issuance has increased steadily. The government is working to create a yield curve, even issuing debt at times when it’s not pressed for cash to support the market. Bond sales could rise to 9 trillion yuan ($1.3 trillion) this year, from 4.9 trillion yuan in 2009. Auctions conform to international standards. And on Jan. 6 the central bank reaffirmed that it will allow foreign financial institutions to sell bonds in the domestic market , while it encouraged domestic companies to sell yuan-denominated bonds in Hong Kong. Hamstrung Central Bank The internationalization of China’s capital markets got a boost last month. The government approved stock index futures, margin trading and short selling. Good stuff all around. Yet China’s central bank remains hamstrung by the depth of the secondary market. A more liquid market would be a vital shock-absorber in times of crisis and offer investors clues about China’s outlook. Now that vast amounts of capital can be moved across the world with just a keystroke, functioning bond markets are more important than ever. So is having a group of influential, globally known bond buyers who can help remind the government its policies are wrong, either by dumping its debt or speaking out. Vital Information If traders felt, for example, that China’s stimulus efforts were too aggressive and inflation loomed, they could push yields higher. Or if they sensed deflation was afoot, they might buy debt. Either way, market rates would offer vital information for government officials and investors. The trouble is, China’s financial system is still more about transferring funds from one part of the economy to another rather than the pricing of risk, said Marshall Mays , director of Emerging Alpha Asset Management Ltd. in Hong Kong. “As such, the levels of interest have never mattered that much,” he said. That’s fine for Indonesia or the Philippines, less so for an economy as important as China’s. When it comes to the bond market, we can no longer give China a pass because of its status as a developing country. Financial strength in 2010 involves more than having $2.4 trillion of currency reserves. It comes from being able to borrow in the yuan and allow foreign companies to sell locally- denominated debt. Only then will China be able to let the yuan trade freely and take a crack at replacing the dollar as the reserve currency. Taming Hot Money A stronger currency might take the pressure off China as it raises its bond-market game. Not only would it clamp down on inflation, but it would reduce frantic speculation in markets. Bets on such a move are manifesting themselves in increased hot-money inflows that are wreaking havoc with the money supply. China could reverse the dynamic by announcing a revaluation with language that makes it clear it won’t act again for a while. China needs a multifaceted approach to slowing the economy and deflating asset bubbles . Administrative decrees to reduce credit creation aren’t enough in the long run. Building a bond market with a cadre of Gross-like players in the game is more important. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Mongolia Plans to Raise as Much as $1.2 Billion in First Dollar Debt Sale

February 9, 2010

By Bloomberg News Feb. 9 (Bloomberg) — Mongolia plans to sell as much as $1.2 billion of bonds overseas later this year, its first benchmark offering of dollar-denominated debt, to fund infrastructure to support its mining industry, Finance Minister Sangajav Bayartsogt said. Investment banks are advising Mongolia to issue debt with maturities of between five and 10 years, Bayartsogt said in an interview in Ulan Bator, the Mongolian capital. The securities may offer a yield of between 8 percent and 11 percent, he said. That compares with 6 percent offered this year by Indonesia, which carries the same debt rating from Standard & Poor’s Corp. Mongolia, which shares a border with three Chinese provinces and Russia, is seeking $25 billion in foreign investment over five years to help mine metal and coal deposits, which are among the biggest untapped mineral resources in the world. The government wants to boost living standards in the nation of about 2.7 million people, where per capita income is about $2,000 a year. “We’ll be interested in buying the debt as Mongolia is abundant with resources and its politics and economy are stable compared with other emerging-market countries,” said Thomas Kwan , director of fixed-income investment at ICBC Credit Suisse Asset Management Co. in Beijing, which manages 75.2 billion yuan ($11 billion) in assets. “I expect the sale will receive good market response.” The spread between yields on developing-nation debt and U.S. Treasuries widened 53 basis points to 3.23 percentage points in the past month, after falling 4.16 percentage points in 2009, according to JPMorgan Chase & Co.’s Emerging Market Bond Index Plus. Investors are shunning riskier bonds as Greece, Portugal and Spain struggle to fund budget deficits. Lining Up Governments and companies in developing nations from Turkey to Slovenia and Indonesia have raised $70.4 billion from debt sales so far this year, according to data compiled by Bloomberg. Indonesia sold $2 billion of 10-year bonds on Jan. 13 and the Philippines had sold $1.5 billion of debt the previous week, including 2020 notes at 5.67 percent. Mongolia’s offering will take place after International Monetary Fund restrictions on the country issuing debt end in October, Bayartsogt said. Officials plan to meet investors in Hong Kong, London and New York, he said. About 20 investment banks, including Goldman Sachs Group Inc ., HSBC Holdings Plc , Morgan Stanley, Credit Suisse Group AG , Deutsche Bank AG and several Japanese lenders are in talks with the government about the benchmark offering, he said. Standard Bank Group Ltd. last June helped Mongolia sell $75 million of zero-coupon one-year debt to selected investors. Dollar’s Appeal “This first issuance is going to be benchmarking Mongolia so we have to prepare very well,” he said. “I think it should be dollar-denominated but Japanese banks are giving us very attractive proposals.” The nation is rated B1 by Moody’s Investors Service, four levels below investment grade. Standard & Poor’s rates Mongolia BB-, the third best non-investment grade. Mongolia’s ranking is on par with Indonesia and the Philippines. “The dollar-bond market is more liquid than samurai bonds and will provide a better price discovery, so it’s better for Mongolia to offer its first global bond in dollars,” said ICBC’s Kwan. “A possible comparison for Mongolia is Kazakhstan, which also has ample resources and relatively stable economy.” Coal and Copper Kazakhstan, holder of 3.2 percent of the world’s proven oil reserves, in November announced plans to sell about $500 million of foreign-currency bonds in 2010, its first such offer in a decade. Economy Minister Bakhyt Sultanov in December said the government may borrow as much as $1 billion from the World Bank, noting that it’s “too early to discuss” an overseas debt sale. Mongolia is seeking to develop the $2 billion Tavan Tolgoi coal deposit and last October signed an agreement with Canada- based Ivanhoe Mines Ltd. and Rio Tinto Group to help develop the $4 billion Oyu Tolgoi copper-gold project starting in 2013. The project may operate for as long as 30 years and generate $30 billion to $50 billion in revenue, President Tsakhiagiin Elbegdorj said last September. — Michael Forsythe , Belinda Cao . Editors: Shanthy Nambiar , Simon Harvey To contact Bloomberg News staff on this story: Michael Forsythe in Ulan Bator at +8610-6649-7580 or mforsythe@bloomberg.net . Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net

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China’s January Surge in Lending Probably Exceeded Fourth Quarter’s Total

February 8, 2010

By Bloomberg News Feb. 9 (Bloomberg) — China’s banks probably made more new loans in January than the previous three months combined as lenders sought to head off a credit clampdown by policy makers seeking to stem rising inflation pressures. New bank lending totaled 1.38 trillion yuan ($201 billion) last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week. Separate figures are projected to show consumer prices rose the most since 2008 and export gains accelerated. Regulators are seeking to slow a credit boom loosed last year that may now be inflating a bubble in China’s property market. The week’s economic reports are likely to reinforce expectations for the central bank to start raising interest rates and loosen controls on the yuan in coming months, moves that might trigger similar steps across the region. “Central banks are looking at China’s policy moves,” said Brian Jackson , an emerging-market strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve Bank of New York and Bank of England. “More aggressive policy tightening from China, including interest-rate increases and yuan appreciation, will make it easier for the rest of the region to move as well.” Year-on-year percent changes in some of China’s January economic data may have been distorted by the lunar new year holiday, which was in January last year but February in 2010. Most businesses close for the week-long celebration. Inflation Quickens At the same time, trends show accelerating price pressures across the economy poised to become world’s second biggest this year, behind the U.S. Aluminum Corp. of China Ltd. , the nation’s top producer of the metal, on Jan. 4 raised alumina prices for the third time in five months. Beijing Yanjing Brewery Co. Jan. 15 raised prices for some of its beer about 10 percent, citing rising costs of fuel and rice. “Inflation fears are beginning to take over from China’s growth euphoria as both consumer and producer inflation continue to climb,” said Kevin Lai , an economist at Daiwa Institute of Research in Hong Kong. “The central bank must tighten policies more aggressively,” said Lai, who expects the People’s Bank of China to start lifting its benchmark rate as soon as this month. Consumer prices probably advanced 2.1 percent in January from a year before, a third straight gain, the median estimate shows. Producer price inflation probably quickened to 3.5 percent, according to the survey . Growth of the M2 money supply measure probably slowed for a second month to 25.9 percent, the median projection shows. Regional Response Inflation is also accelerating from South Korea to Vietnam as commodity and food prices rise amid the Asia-led global recovery. Still, South Korea, India, Indonesia, Thailand, Malaysia, Taiwan and the Philippines have yet to raise rates and policy makers in countries including Thailand and Taiwan are restraining currency gains, traders say. In China, authorities have kept the yuan at about 6.83 per dollar since July 2008 to help exporters after letting it appreciate about 21 percent the previous three years. China may allow the yuan to begin appreciate this quarter, which may make its Asian neighbors more comfortable in allowing their currencies to advance, said RBC’s Jackson. Any need to restrain the yuan may be easing. Exports probably jumped 28 percent last month from a year earlier, and imports probably surged 85 percent, leaving a trade surplus of $20 billion, Bloomberg surveys show. Growth Quickens Economic growth accelerated to a 10.7 percent year-on-year pace last quarter, the fastest since 2007, responding to an unprecedented 9.59 trillion yuan of credit extended by banks in 2009 and a 4 trillion yuan two-year fiscal stimulus plan. The estimate for new lending in January is 48 percent more than the total extended in the last three months of 2009. It’s also 18 percent of the 7.5 trillion yuan Premier Wen Jiabao’s government set as the target for this year. Property prices in 70 major cities climbed 7.8 percent in December, the most in 18 months, responding in part to the record credit surge. “There are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China,” Neil McDonald , a business restructuring and insolvency partner in Hong Kong with law-firm Lovells LLP, said at conference last week, using another term for the yuan. “At some point there’s going to be a reckoning for that.” The Shanghai Composite Index has slumped 10 percent since the year began on concern the government will curb lending to cool the economy. The central bank asked lenders to set aside more money as reserves on Jan. 12, the first such increase since June 2008. Some lenders have since been asked to limit credit, punished by even higher reserve ratios. Bank of China Ltd. , the nation’s third-largest lender by market value, on Feb. 3 reduced discounts for some mortgages, citing concern about rising property-market risks. Industrial & Commercial Bank of China Ltd. , the world’s largest bank by market value, said Jan. 27 it “stabilized” loan growth after lending rose “relatively fast” in the first half of the month. — Li Yanping . Editors: Chris Anstey , Cherian Thomas To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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Corporate Bond Risk Tumbles as EU Backs Greek Deficit Plan: Credit Markets

February 3, 2010

By Paul Armstrong and Tim Catts Feb. 3 (Bloomberg) — The cost of insuring against a corporate bond default tumbled on speculation Greece’s deficit crisis, which helped push credit spreads to the widest in a month, is closer to being resolved. European Union Monetary Affairs Commissioner Joaquin Almunia said today the European Union endorses Greece’s three- year plan to cut the region’s widest budget deficit by more than three quarters. Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control, including a freeze on state workers’ pay and an increase in fuel tax. “The market is taking its cue from what happens in the sovereign world,” said Nick Burns , a credit strategist at Deutsche Bank AG in London. “Positive sentiment on sovereign CDS seems to have a positive effect on the corporate world as well.” Credit-default swaps, derivatives used to hedge against losses and speculate on credit quality, tumbled in Europe. Contracts on the high-yield Markit iTraxx Crossover Index dropped 14 basis points to 434, according to JPMorgan Chase & Co. prices at 11:45 a.m. in London, after climbing for the past three weeks. The extra yield investors demand to hold company bonds rather than the safest government debt fell 1 basis point to 165, Bank of America Merrill Lynch indexes show. Global corporate bond spreads had widened on concern Greece’s economic crisis would infect the rest of Europe. The gap climbed to as much as 166 on Feb. 1, the most since Jan. 7, after Moody’s Investors Service said Greece and Portugal face a “slow death” from deteriorating public finances, Merrill Lynch indexes show. Greek Bond Risk “We are endorsing the Greek program,” Almunia told reporters. “We are giving confidence and supporting the Greek authorities.” Credit-default swaps on Greek government bonds also fell today, signalling an improvement in perceptions of credit quality, and extended their decline after Almunia spoke in Brussels. The swaps dropped 13.5 basis points to 373.5, after rising to a record 422 on Jan. 28, according to CMA DataVision prices. Greek 10-year government bonds rose for the third time in four days, narrowing the premium investors demand to hold the debt over benchmark German bunds by 15 basis points to 3.39 percentage points. Greece had the EU’s widest deficit at 12.7 percent of gross domestic product last year and struggled to convince investors it can bring the shortfall within the bloc’s 3 percent limit. The Brussels-based commission, the EU executive, said today it will demand monthly updates from Greece on its progress in completing the budget-cutting plan. Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers. Energy Company Debt Elsewhere in credit markets, energy companies are increasing bond sales at the fastest rate since October as investors snap up the notes of companies with rising profits while the overall pace of debt issuance slows. Williams Partners LP , the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month. Moody’s raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68. ‘Respectable’ Data The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady , a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico. The extra yield investors demand to hold energy bonds instead of Treasuries was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point. The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt. High-Yield Debt High-yield bonds are a better investment than U.S. stocks, according to Rex Macey , the chief investment officer of Wilmington Trust Corp. , which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York. Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers. Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes. “We are in the midst of a very hot debt market,” Steven Malcolm , the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade. Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said. Petroleo Brasileiro The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA , Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show. Denbury , a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex , an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire. More energy companies may borrow this year to pay for takeovers, said Ken Duffel , an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.53 to $77.76 today. “A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.” North American Swaps Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies. Derivatives are contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather. The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement. Rating Pressure “If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess , senior credit officer at Moody’s in New York. The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data. “High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal , a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets. High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P. Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday. Emerging Markets In emerging markets, Coca-Cola Femsa SAB , the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries. The company, controlled by Monterrey-based Fomento Economico Mexicano SAB , is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20. To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net ; Paul Armstrong in London at parmstrong10@bloomberg.net

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China, Iran Threats Lead U.S. Military to Draw Up New Air-Sea Battle Plan

January 31, 2010

By Viola Gienger and Tony Capaccio Feb. 1 (Bloomberg) — The U.S. military is drawing up a new air-sea battle plan in response to threats such as China’s persistent military build-up and Iran’s possession of advanced weapons, according to the Pentagon’s latest strategy review. The Air Force and Navy are seeking more effective ways of ensuring continued access to the western Pacific and countering potential threats to American bases and personnel, according to the Quadrennial Defense Review to be released later today. The joint Air Force-Navy plan would combine the strengths of each service to conduct long-range strikes that could utilize a new generation of bombers, a new cruise missile and drones launched from aircraft carriers. The Navy also is increasing funding to develop an unmanned underwater vehicle, according to the report. The battle plan is among a range of new initiatives outlined in the review, which is conducted every four years to revise U.S. military strategy for the coming decade or more. The new report places top priority on the fights in Afghanistan and Iraq and against terrorist threats elsewhere, while also preparing for future threats. “This is truly a wartime QDR,” Defense Secretary Robert Gates wrote in a cover letter for the report. “For the first time, it places the current conflicts at the top of our budgeting, policy and program priorities.” Two-War Capability The review deemphasizes but does not abandon the Pentagon’s doctrine that calls for the military to be able to fight two major wars nearly simultaneously. It acknowledges this mission but says planning should focus more closely on other scenarios, such as irregular warfare including conflicts involving insurgents or drug traffickers and even humanitarian disasters. “In the mid- to long-term, U.S. military forces must plan and prepare to prevail in a broad range of operations that may occur in multiple theaters in overlapping time frames,” the Defense Department says in the review. “This includes maintaining the ability to prevail against two capable nation-state aggressors,” it states. Alluding to China in his cover letter, Gates cites longer- term threats such as “the military modernization programs of other countries.” He also hints at dangers such as al-Qaeda in referring to “non-state groups developing more cunning and destructive means to attack the United States and our allies and partners.” Tensions With China U.S. officials have often called on their Chinese counterparts to provide explanations and assurances that their moves are purely defensive. The two countries resumed military talks last June, then China halted visits again over the Defense Department’s Jan. 29 announcement of a new arms sale to Taiwan. China is developing and deploying “large numbers” of advanced missiles, new attack submarines, long-range air defense systems and capabilities to wage electronic warfare and target computer systems, according to the report, which echoes an assessment of China’s military power issued almost a year ago. China’s refusal to provide adequate assurances of its intentions raises “a number of legitimate questions regarding its long-term intentions,” the Pentagon says in the review. Citing “more complex” security conditions in the region, including North Korea and terrorist threats in Southeast Asia, the review calls for “a more widely distributed” and flexible U.S. presence in Asia that relies more on allies. Partners would include Australia, Thailand, the Philippines, Singapore, Indonesia, Malaysia and Vietnam. Threat From Iran In the Middle East, Iran is fielding small attack boats in the Persian Gulf, a development that U.S. officials have cited in the past. That compounds the threat to naval operations from the acquisition by Iran and other nations of weapons such as quiet submarines and advanced cruise missiles that can target ships, according to the report. Iran also has provided drones and shoulder-fired missiles to the Islamic militant group Hezbollah in Lebanon, and Russia and other nations have contributed to the spread of surface-to- air missiles, the department said. Among the solutions proposed are more ways to deploy U.S. forces abroad, such as naval assets, “in regions facing new challenges.” Existing bases also need to be either hardened to protect against potential attacks or reinforced with back-up locations or by dispersing them in multiple places, the department concluded. The Pentagon has about 400,000 U.S. military personnel stationed overseas, either in war zones or elsewhere. The review emphasizes “taking care of our people” serving in multiple long deployments that take a “significant toll” on them and their families. Other Concerns In addition to supporting existing wars, the Quadrennial review emphasizes the need for more unmanned aircraft, intelligence, special forces, helicopters and long-range strike capabilities as well as skills such as foreign languages and training of foreign military forces. The U.S. military, especially the Navy and Air Force, also should find better and faster ways to strengthen the defense systems of foreign allies and partners as needed, the Pentagon said. The Pentagon should continue to maintain a nuclear arsenal as a “core mission” until “such time as the administration’s goal of a world free of nuclear weapons is achieved,” according to the report. The potential threat of cyber attacks and the need to conduct “high-tempo operations” will require more expertise in that field and centralized command of cyber operations, the department said. To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net ; Viola Gienger in New Delhi via vgienger@bloomberg.net .

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Subbarao Seeks to Assure Investors on Prices, Aid India’s Economic Rebound

January 30, 2010

By Cherian Thomas Jan. 30 (Bloomberg) — India’s central bank Governor Duvvuri Subbarao sought to assure investors that he will restrain inflation, while refraining from raising interest rates to support a rebound in Asia’s third-largest economy. The Reserve Bank of India yesterday left benchmark rates unchanged and instead boosted the ratio of deposits lenders must hold in reserve by more than forecast, to 5.75 percent. The step is part of a gradual tightening of monetary policy that will lead to higher borrowing costs in coming months, said Rajeev Malik , a regional economist at Macquarie Group Ltd. The goal is to secure a recovery in economic growth toward 8 percent this year while containing a surge in inflation that would impoverish households and drive up longer-term bond yields. Subbarao, 60, is emulating a course taken across the region, with nations from China to the Philippines taking steps toward higher borrowing costs without rushing to raise rates. “The Reserve Bank of India has embarked on a handle-with- care monetary exit,” said Singapore-based Malik. “While inflation has become more important, it has not taken its eyes off growth dynamics.” Malik expects the central bank to raise interest rates by between 1 and 1.5 percentage points over the next year, starting in either March or April. India’s generic 10-year government bond yields reached 7.71 percent on Jan. 13, the highest level since November 2008, and closed at 7.58 percent yesterday in Mumbai. ‘Keeping a Vigil’ “Bond yields haven’t reacted much and are likely to remain stable,” said Jayesh Mehta , country treasurer and head of fixed income at Bank of America Corp. in India. “The RBI has been keeping a vigil on inflation and had announced its intentions several months back.” India’s benchmark stock index gained 0.3 percent yesterday, reversing earlier losses, after the central bank predicted faster growth. The rupee gained 0.4 percent to 46.18 against the dollar from 46.36. Subbarao expects India’s economy to grow 7.5 percent in the year to March 31 from the 6 percent forecast earlier as demand for manufactured goods and services rise. He also raised the bank’s inflation forecast to 8.5 percent by March 31 from 6.5 percent. As a result, the cash reserve ratio was raised from 5 percent while the benchmark reverse repurchase rate was kept unchanged at 3.25 percent and the repurchase rate at 4.75 percent yesterday. Currency Gains Analysts anticipate currency gains as strengthening economies force central banks to act. The rupee may gain almost 8 percent by year-end to 43 per dollar, according to the median forecast in Bloomberg survey. China’s yuan and Malaysia’s ringgit are estimated to advance 3.7 percent. China, Malaysia and the Philippines moved closer to raising interest rates in January. In China, the central bank ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after loan growth surged. Malaysia kept borrowing costs unchanged on Jan. 26, while warning that rates cannot be kept “too low” for too long because of the need to prevent a build-up of “financial imbalances.” The Philippines increased its so-called rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank. Robust Growth “The growth in emerging-market economies such as China and India is expected to be robust,” Subbarao said yesterday. He said India could sustain 7.5 percent growth in the next financial year starting April 1. The International Monetary Fund on Jan. 26 boosted its 2010 gross domestic product growth projection for India to 7.7 percent from the 6.4 percent forecast in October. India’s growth prospects are luring investments. Bridgestone Corp. said Jan. 29 that a subsidiary in India will begin production of radial tires for buses and trucks in the first half of 2011 to tap growing demand in the country. The Tokyo-based company will invest 3.3 billion yen ($36 million), for daily production of 400 units, it said. Cisco Systems Inc. Chief Executive Officer John Chambers told CNBC in Davos Jan. 29 that he would be “not surprised” if China and India grew between 7 percent and 10 percent in 2010. Subbarao said his objective is to “anchor” inflation expectations without hurting growth. “The central bank has to balance growth versus inflation because in a country like India, inflation is sometimes more important than growth,” said Anil Singhvi , vice chairman of Reliance Natural Resources Ltd., a unit of India’s third-largest utility. Inflation is politically sensitive in India as it hurts the poor the most. The Food & Agriculture Organization says 231 million people in the country are undernourished, more than in Sub-Saharan Africa. Prime Minister Manmohan Singh’s government is under pressure to tame inflation after opposition parties stepped up their criticism of his administration for failing to curb price gains. To contact the reporter on the story: Cherian Thomas in Mumbai at cthomas1@bloomberg.net .

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Asian Currencies Post Weekly Drop on China Tightening, Obama’s Bank Curbs

January 22, 2010

By Bob Chen Jan. 23 (Bloomberg) — Asian currencies fell this week, led by South Korea’s won and the Indonesian rupiah, on speculation China will take more steps to curb inflation after economic growth accelerated to a three-year high. The Bloomberg-JPMorgan Asia Dollar Index declined 0.7 percent this week, the biggest drop in eight months, on concern monetary tightening in China will damp a recovery in global trade. A proposal by President Barack Obama to reduce risk- taking by U.S. financial institutions cooled demand for emerging-market assets, dragging regional stocks lower. “The China bubble risk is a big source of fear for financial markets, particularly investors in risky assets around the world,” said Tim Condon , head of Asia research at ING Groep NV in Singapore. “Lower stocks in the U.S. are going to mean knee-jerk selling in Asia and that is going to show up in a higher dollar against Asia ex-Japan currencies.” South Korea’s won fell 2.4 percent over the last five days to 1,150.85 per dollar in Seoul, according to data compiled by Bloomberg. Indonesia’s rupiah declined 1.7 percent to 9,359 and Malaysia’s ringgit slid 1.7 percent to 3.3997. China is stepping up measures to slow record lending and inflation in the world’s fastest-growing major economy. The central bank has guided short-term bill yields higher and raised the amount of funds banks must set aside as reserves this month to drain funds from the financial system. China Tightening Gross domestic product on the mainland increased 10.7 percent in the fourth quarter, the biggest gain since 2007, the National Bureau of Statistics said in Beijing on Jan. 21. Economic growth accelerated from a revised 9.1 percent in the prior three months. Inflation quickened to 1.9 percent in December, the most since November 2008, a separate report showed. “China might raise interest rates,” said Janet Lin , a currency trader in Taipei at Taiwan Business Bank. “The global market is worried about that.” Policy makers will likely act sooner than previously anticipated to contain prices, a Bloomberg News survey of economists showed after the data release. China will raise interest rates by the end of June and also ratchet up banks’ reserve requirements , according to the median of 17 forecasts. Stocks slumped on Obama’s plan to curb banks’ trades that aren’t done for the benefit of customers. The Standard & Poor’s 500 Index of U.S. shares dropped 3.9 percent this week, the biggest decline since October, while the MSCI Asia-Pacific Index fell 3.5 percent, the most in seven months. Obama Proposals Obama’s proposals, which will be added to an overhaul of regulations being considered by Congress, would also prohibit banks from investing in hedge funds and private equity funds. “Currency markets in Asia are tumbling on risk aversion caused by news of Obama’s plans to curb banks’ trading,” said Dariusz Kowalczyk , chief investment strategist at SJS Markets Ltd. in Hong Kong. “Obama is getting more populist and his move may signal more anti-business policies ahead, which could drag on economic growth and business’s profits.” The ringgit posted the biggest weekly drop since February 2009, and the rupiah had its steepest decline in seven months. China’s 12-month yuan forwards fell 0.4 percent to 6.6315 per dollar, reflecting traders’ bets for a 2.9 percent gain in the currency in a year. The contracts were signaling 3.3 percent appreciation a week earlier. Rate Decisions Bank Negara Malaysia will maintain its overnight interest rate at a record-low 2 percent on Jan. 26 to help pull the economy out of a recession, according to all 13 economists in a Bloomberg News survey. Policy makers in the Philippines and India also meet next week to decide on borrowing costs. South Korea and the Philippines are due to report gross domestic product numbers for the fourth quarter. Elsewhere in Asian currency trading, Thailand’s baht weakened 0.4 percent this week to 32.99, the Taiwan dollar dropped 0.5 percent to NT$31.980 and the Philippine peso declined 0.8 percent to 46.19. China’s yuan was little changed at 6.8269 in the spot market. To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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Stocks, Commodities Fall on Obama Plan, Speculation China to Raise Rates

January 22, 2010

By Rita Nazareth and David Merritt Jan. 22 (Bloomberg) — Equities and commodities declined for a third day on concern President Barack Obama ’s plan to rein in banks and a possible interest-rate increase in China will stifle the economic recovery. Oil and gold retreated and Treasuries headed for a third weekly gain. The Standard & Poor’s 500 Index lost 0.3 percent at 11:43 a.m. in New York, extending its slide over the past three days to 3.3 percent and wiping out its gain for 2010. In Europe, the Dow Jones Stoxx 600 Banks Index plunged as much as 4 percent to an almost six-month low. The MSCI Emerging Markets Index declined 1.7 percent, heading for the biggest weekly loss since October. The yield on the 10-year Treasury note added 0.03 percentage point to 3.62 percent, trimming its weekly drop. Obama’s plan to stem proprietary trading and hedge-fund investments at banks spurred concern that a recovery in S&P 500 earnings from a record nine-quarter slump will be threatened. China will raise interest rates by the end of June and increase banks’ reserve requirements, according to the median forecasts of 17 economists surveyed by Bloomberg. “This may be the beginning of a bit of a correction,” said Michael Strauss , who helps oversee $26 billion at Commonfund in Wilton, Connecticut. “There are still questions on yesterday’s announcement from Washington. Is this something that’s going to limit balance sheet expansion of banks to make loans? Also, China is taking some steps to slow down a robust economy. On the corporate side, we don’t have enough details to say that top- line numbers are significantly better.” The S&P 500 joined the Dow Jones Industrial Average in erasing its gain for 2010 and was poised for a 2 percent weekly slump, its biggest since October. Earnings Season A 70 percent rebound from a 12-year low in March, the biggest stock market rally since the Great Depression, boosted the S&P 500’s price-earnings multiple to a seven-year high of 25 last week. Analysts predict earnings at financial companies rose 114 percent in the fourth quarter, accounting for most of the 73 percent projected increase in S&P 500 profits. Losses in U.S. equities were limited today as General Electric Co. and McDonald’s Corp. rallied on better-than- estimated results. China’s stronger-than-anticipated economic rebound in the fourth quarter may make it harder for Premier Wen Jiabao to convince the public that consumer prices won’t surge. Inflation accelerated to a more-than-forecast 1.9 percent in December and gross domestic product climbed 10.7 percent, the National Bureau of Statistics said in Beijing yesterday. Policy makers have said managing inflation expectations is one of the government’s central objectives. ‘A Fine Line’ “Authorities are certainly treading a fine line between curbing bubbles and choking off economic growth,” Jim Reid , the London-based head of fundamental strategy at Deutsche Bank AG, wrote in note to investors. “It’s clear that politicians are starting to have enough confidence that the global economy has been saved.” The MSCI World Index of 23 developed nations’ stocks retreated for a third day, its longest losing streak in more than a month. Asian stocks fell for a fifth day. ICAP Plc, the world’s biggest broker of trades between banks, tumbled 7 percent in London. Deutsche Boerse AG, the operator of the Frankfurt stock exchange, slid 4.5 percent. The dollar snapped six days of gains versus the euro, sliding 0.5 percent from the near the highest level since July, and traded near a one-month low against the yen. Corporate Bonds The rally in corporate bonds that drove U.S. borrowing costs to two-year lows faltered. The extra yield investors demand on corporate bonds instead of Treasuries widened to 272 basis points from the low this year of 266 basis points, or 2.66 percentage points, on Jan. 14, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master Index. The last time spreads widened this fast was in November, when Dubai said state-controlled companies would reschedule debt payments, roiling world markets. Emerging-market stocks fell to the lowest level in a month, led by Kazakhstan’s KASE Index, which dropped 3.1 percent. Russia’s Micex Index slipped 1.8 percent, even after Fitch Ratings raised its outlook on the country’s credit rating to “stable” from “negative.” Indexes in Taiwan, South Korea and the Philippines declined more than 2 percent. The Shanghai Composite Index dropped 1 percent, extending the year’s decline to 4.5 percent. The perceived risk of holding bonds sold by HSBC Holdings Plc, Deutsche Bank AG and Credit Suisse Group AG rose, driving the Markit iTraxx Financial index of credit-default swaps up as much as 5.25 basis points to 89, the highest since September. Greek bonds fell on speculation the government may struggle to find buyers of a planned 3 billion euros ($4.2 billion) of debt. The declines drove the yield on the 10-year bond up as much as 38 basis points. Crude oil for March delivery slipped 0.8 percent to $75.51 a barrel in New York trading, retreating for a third day. Gold futures for February delivery dropped $16.20, or 1.5 percent, to $1,087 an ounce. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net .

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Google in China, Obama’s Bank Tax: Week in Review

January 16, 2010

Jan. 15 (Bloomberg) — Google Inc.’s computer attacks from China and President Barack Obama’s proposal to tax the biggest financial firms lead a selection of the week’s top stories. Google said it was one of at least 20 companies targeted in a “highly sophisticated” cyber attack ,” and announced it will stop censoring Web-search results in China. Yahoo! Inc. was also targeted . Click here for more on Google and China. Obama said the proposed tax on as many as 50 of the largest financial firms will recoup money spent to rescue those companies. The tax may cost JPMorgan Chase & Co. and Bank of America Corp. more than $1.5 billion each per year. Bloomberg columnist David Reilly comments on taxing bankers’ bonuses , while Mark Gilbert’s Hedge Fund Guy seduces Warren Buffett. Ann Woolner discusses the gay marriage debate . Read Bloomberg BusinessWeek’s cover story, “ Apple vs Google: Why They Can’t Be Friends .” Click on the VIDEO tab above for the video of the week, an interview with former Merrill Lynch & Co. Chief Executive Officer John Thain. Read the story here . Following is a selection of stories from the past week, chosen by senior editors at Bloomberg News. Merkel Says Greece Means Euro Faces ‘Difficult’ Time Jan. 14 (Bloomberg) — German Chancellor Angela Merkel said Greece’s mounting budget deficit risks hurting the euro, saying the currency faces a “very difficult phase.” California Creditors Dread IOUs With Aid Plea Failing Jan. 13 (Bloomberg) — California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 24 percent since September. Hedge Fund Lender Reaps Returns on Fallen Companies Banks Shun Jan. 12 (Bloomberg) — Hedge fund manager Michael Tennenbaum, at age 74, plans to race down a giant slalom course on Vail Mountain in Colorado in March at the Directors’ Invitational Ski Classic, an annual event that pits pro skiers against business executives. Tennenbaum, who’s competed in the classic for 20 years, finds battling the gates on a slalom run almost as thrilling as his style of investing: making loans to money-losing companies. UBS’s Gruebel Says Stopping Client Redemptions ‘Imperative’ Jan. 11 (Bloomberg) — UBS AG Chief Executive Officer Oswald Gruebel said it’s “imperative” that the largest Swiss bank halt withdrawals by wealthy clients after six quarters of net outflows. Indonesia Pays More Than Philippines in Bond Sale Jan. 13 (Bloomberg) — Indonesia sold $2 billion of 10-year bonds at a higher yield than last week’s sale by the Philippines, after scaling back the offering and cancelling plans to sell 30-year debt. DragonWave in Talks With AT&T, Verizon to Supply Gear Jan. 12 (Bloomberg) — DragonWave Inc. Chief Executive Officer Peter Allen said he’s confident the Canadian wireless equipment maker has a good chance to win business from the largest U.S. mobile-phone companies this year. Miep Gies, Dutch Woman Who Found Anne Frank Diary, Dies at 100 Jan. 11 (Bloomberg) — Miep Gies, the Dutch woman who helped hide Anne Frank’s family from the Nazis and discovered the teenage girl’s now-famous diary, has died. She was 100. Beatty Would Sleep With Any Woman, Because ‘You Never Know’ Jan. 11 (Bloomberg) — Warren Beatty’s new biographer estimates that the notorious lothario has slept with almost 13,000 women, an impressive figure to everyone except perhaps Wilt Chamberlain and Hugh Hefner. The top 10 most-read stories on Bloomberg.com for the past week (excluding daily market coverage): 1. China Ends U.S.’s Reign as Largest Auto Market 2. Google May Exit China After Ending Self-Censorship 3. Dubai’s First Foreclosure May Open Floodgates in Worst Market 4. Bank Profits Means Stocks at 15% Discount to S&P 500 5. Iran Says U.S., Israel May Be Behind Killing of Nuclear Expert 6. Obama Plans to Raise $120 Billion From Banking Fees 7. Federal Reserve Seeks to Protect U.S. Bailout Secrets 8. Blankfein Response Was ‘Troublesome,’ Angelides Says 9. Bernanke Bond Spread Most Since 2007 Shows Decoupling 10. U.S. Has Contingency Plan for Dealing With Iran, Petraeus Says # # # # -0- Jan/15/2010 18:14 GMT

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Indonesia Said to Scrap 30-Year Bond Sale, Cut Debt Offering to $2 Billion

January 12, 2010

By Shelley Smith and Lilian Karunungan Jan. 12 (Bloomberg) — Indonesia scaled back a sale of dollar-denominated bonds to $2 billion, cancelling plans to sell 30-year debt, people familiar with the transaction said. The government plans to sell 10-year notes at a yield of about 6 percent, a premium of 2.2 percentage points more than similar-maturity U.S. debt, according to the people familiar, who asked not to be identified before a public announcement. The Philippines, whose bonds carry the same BB- rating as Indonesia from Standard & Poor’s, sold 2020 securities last week at 5.67 percent, 0.33 percentage point less. Holders of Indonesian debt, including Aberdeen Asset Management Plc and Vegagest SGR SpA, said last week that Indonesia may have to reward investors with higher yields as a rally in emerging-market bonds slows after the biggest gains in six years. Mexico, Poland, the Philippines and Turkey beat Indonesia to the market and raised $8.8 billion in overseas debt sales this year. “The market has rallied a lot and the spreads on Indonesian sovereign are a bit too tight to be attractive,” said Esther Teo , a bond investor at HwangDBS Investment Management in Kuala Lumpur, which manages about $2.3 billion. “We would prefer rupiah bonds for extra yields.” Indonesia’s 11.625 percent dollar debt maturing March 2019 yielded 5.81 percent today, a premium of 2 percentage points over similar-dated U.S. Treasuries. They have returned 51 percent since they were sold on Feb. 27 to yield 11.75 percent, or 8.759 percentage points more than U.S. government debt. Similar-maturity rupiah debt yields 9.55 percent. Emerging Markets The latest issuance, which initially targeted between $3 billion and $4 billion, will be priced in New York, the people said. Indonesia hired Barclays Capital Plc, Citigroup Inc. and Credit Suisse Group AG for the sale, a finance ministry official said last month. The spread between U.S. and developing-nation debt narrowed to 2.64 percentage points yesterday, the lowest in 19 months, according to the JPMorgan Emerging-Market Bond Index Plus. The gap shrank 4.16 percentage points in 2009 as interest- rate cuts and stimulus spending revived the global economy from a recession. Pacific Investment Management Co., the world’s biggest bond fund, said last week it was “highly unlikely” developing nations’ dollar debt would perform as well as last year, when the EMBI+ index returned 26 percent. “There’s a big rush to get out the door before U.S. Treasury yields rise further,” Edwin Gutierrez , who oversees $5 billion in emerging-market debt for Aberdeen in London, said before the sale. “We just don’t see much value at these levels” for sovereign dollar debt, he said. Debt Rally Indonesia’s dollar bonds are the third-best performing in the region, after Pakistan and India, giving investors a return of 45 percent in the past year, according to indexes compiled by HSBC Holdings Plc. Debt of the Philippines returned 22 percent. The bond sale was designed to help 47-year-old Finance Minister Sri Mulyani Indrawati fund a budget deficit forecast to reach 98 trillion rupiah ($10.7 billion) this year, equal to 1.6 percent of gross domestic product. Sri Mulyani, named Finance Minister of the Year by Euromoney magazine in 2006, this week announced plans to sell $750 million to $1 billion of so-called Samurai bonds this year. Indonesia fared better than its neighbors in the economic slump, as growth in the $514 billion economy accelerated last quarter for the first time in a year. President Susilo Bambang Yudhoyono , 60, who won re-election in 2009, aims to boost the country’s expansion to more than 7 percent from an average of 5.1 percent last decade. Moody’s Investors Service on Sept. 16 raised the nation’s rating by one level to Ba2, two levels below investment grade, citing the economy’s resilience. Demand for the 10-year debt now being sold is “quite good,” said Chia Woon Khien , head of currency and interest-rate strategy for Asia outside of Japan at Royal Bank of Scotland Group Plc in Singapore. Investors were demanding as much as 8 percent yields for the 30-year debt, compared with a prevailing yield closer to 7 percent “so they ditched it,” Chia said. The rupiah rose to a 17-month high of 9,121 to the dollar yesterday, extending last year’s 16 percent gains, according to data compiled by Bloomberg. The currency recently traded 9,175. The yield on benchmark 10-year rupiah bonds fell 10 basis points to 9.55 percent. The government raised 7.5 trillion rupiah from sales of local-currency debt at an auction today, the finance ministry said in a statement. That was more than the 5 trillion rupiah it originally sought. “Indonesia is now much more confident of its currency stability and credit standing,” Chia said. “They don’t need the funds anyway as they’ve over-funded last year.” To contact the reporters on this story: Shelley Smith at ssmith118@bloomberg.net ; Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net .

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El Nino May Curb Philippine Rice Harvest Damaged by Storms, Official Says

January 7, 2010

By Luzi Ann Javier Jan. 8 (Bloomberg) — Rice output in the Philippines, the world’s biggest importer, may decline this quarter as El Nino reduces rainfall in major producing regions, an official said. “The shortfall will naturally increase because production will be lower compared to last year,” Agriculture Undersecretary Emmanuel Paras said in an interview yesterday. “We are still assessing just how much the volume will drop.” The Philippines, which lost 1.3 million metric tons of rice in storms last quarter, may remain in the import market as it faces El Nino after securing more than 2 million tons of rice from overseas suppliers since November. The nation lost 2.36 million tons when a moderate El Nino hit in 1998, Paras said. “This time, the impact may not be as severe,” Paras said. “We’re monitoring the water levels in dams because that will determine how much water is available to the crop on the ground.” El Nino, the weather pattern that creates a warming of the Pacific Ocean, can reduce rainfall or prolong the dry season in parts of Asia, damaging agricultural output. Twenty provinces, including Nueva Ecija, Bulacan, Pampanga and Sultan Kudarat, received between 20 percent to 59 percent below-normal rainfall in the past three months, Daisy Ortega, senior weather specialist at the Philippine Atmospheric Geophysical and Astronomical Services Administration said in a phone interview from Manila yesterday. Prices Jump Central Luzon, home to the nation’s biggest producing provinces including Nueva Ecija, Pampanga and Bulacan, accounted for 18 percent of output in 2008, according to the Bureau of Agricultural Statistics Web site. Rice futures jumped 34 percent from last year’s low of $11.195 per 100 pounds in Chicago, as the Philippines accelerated imports, and on concern India, the world’s second- largest grower and consumer, may become a net importer this year, after drought parched crops in the South Asian nation last year. Philippine rice imports may expand to a record 3 million tons in 2010, from 1.78 million tons last year, “in a worst case scenario,” if El Nino damages crops, Rex Estoperez , spokesman of the National Food Authority, said Nov. 23. Rice farmers in the Philippines collect their first harvest of the calendar year between March and May. Nueva Ecija is the nation’s largest rice producing province, according to Paras. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Philippines, Turkey Bond Demand Exceeds Offers; Yields Reach 19-Month Low

January 6, 2010

By Clarissa Batino and Seda Sezer Jan. 6 (Bloomberg) — The Philippines received more than $3 billion of orders for a planned $1.5 billion bond sale and Turkey got more than triple the $2 billion it offered as confidence in emerging markets drove yields to the lowest in 19 months. Turkey’s government said it received $7.3 billion of orders for its sale of 30-year bonds yesterday. Bids for the Philippine sale were at least twice the amount on offer, according to two investors who received notice from underwriters. The extra yield investors demand over U.S. Treasuries to own emerging-market bonds dropped 5 basis points to 2.69 percentage points, the lowest spread since June 2008, according to JPMorgan Chase & Co.’s EMBI+ Emerging Markets Bond Index. Emerging market borrowers are competing for funding in the dollar bond market after General Electric Capital Corp. led at least $23.2 billion of sales yesterday, the second-highest amount ever, according to data compiled by Bloomberg. The Philippines is vying with Indonesia and Vietnam to be the first Asia-Pacific government to tap the market this year. “It pays to be a first mover in the global bond market when U.S. interest rates are expected to go up later this year,” said Rafael Algarra , treasurer at Security Banking Corp. in Manila. “There is still good appetite for emerging-market debt.” Global funds bought more than $8 billion of emerging-market debt in 2009, after pulling out $18 billion in 2008, according to data published by U.S.-based research company EPFR Global. The MSCI Emerging Markets Index of stocks from 22 developing countries surged by a record 75 percent last year and rose 0.3 percent as of 11:35 a.m. in London. Offered Yields The Philippines hired Barclays Capital Plc, Deutsche Bank AG and HSBC Holdings Plc to sell more of the 10- and 25-year securities that were first sold in 2009, according to an e-mail sent to investors by underwriters. Indonesia plans to sell as much as $4 billion of U.S. currency bonds with 10- and 30-year maturities, while Vietnam is seeking to raise as much as $1 billion in 10-year dollar notes, according to people with direct knowledge of the plans. The Philippines has sold dollar bonds every January since 2005. The yield on the Philippines’ 6.5 percent dollar bonds due 2020 was unchanged at 5.61 percent as of 4 p.m. local time, while the rate on the 6.375 percent 2034 note rose three basis points to 6.59 percent, according to ING Groep NV prices. Underwriters were offering yields of 5.7055 percent on the latest sale of the Philippine 10-year debt and 6.686 percent on the 25-year notes as of 3:30 p.m. local time, lower than the indicative rate circulated around 1 p.m., according to investors who received the notice via mobile phone message. ‘Big Rush’ Emerging market borrowing costs plunged last year as the U.S. led central banks around the world in cutting interest rates to almost zero, lowering the benchmark U.S. Treasury yields that are used as a benchmark to price bonds. “There’s a big rush to get out the door before U.S. Treasury yields rise further,” said Edwin Gutierrez , who manages about $5 billion in assets for Aberdeen Asset Management Plc in London. “Right now there’s still sufficient cash sitting around looking for a home, which obviates the need for much of a concession,” he said. The worst global recession since World War II has pushed investors to economies with higher growth rates. Asia’s developing economies will expand 7.3 percent this year after growth of 6.2 percent in 2009, according to International Monetary Fund projections. The U.S. will expand 1.5 percent after a 2.7 percent contraction, it said. Turkey Sale Turkey’s bonds, sold yesterday at a yield of 6.85 percent yesterday, were little changed today, yielding 6.858 percent, according to ING Bank NV at 1:18 p.m. in Istanbul. Yields on Turkish bonds dropped the most since 2004 last week after Prime Minister Recep Tayyip Erdogan told officials from his party that the government is close to signing a two- year loan accord with the International Monetary Fund. The country’s credit rating was lifted two levels to BB+, the highest non-investment-grade status, last month by Fitch Ratings, which cited the economy’s “resilience” during the global crisis. The government plans to raise $5.6 billion in international markets this year, up from $3.75 billion in 2009. The Philippines plans to raise $2 billion from overseas debt sales this year. Foreign and domestic borrowing may increase as the deficit widens, Finance Secretary Gary Teves said last week. The Southeast Asian nation’s deficit may widen to 293 billion pesos ($6.4 billion) this year from about 290 billion pesos last year, Teves said last week. ‘Reasonably Good Credit’ The budget shortfall in the first 11 months of 2009 climbed to a record 272.5 billion pesos, exceeding the official estimate and all annual deficits since at least 1985 when Bloomberg data began. The gap will probably narrow to 3.5 percent of gross domestic product this year from about 3.7 percent of GDP in 2009, Teves said. The Philippines has 650 million euros ($932.9 million) of debt due in February and $561.5 million of dollar-denominated notes maturing in March, data compiled by Bloomberg show. If the bond sales are “reasonably priced or offer a small premium over the current market, I think people would still want to buy,” said Wee-Ming Ting , the Singapore-based head of Asian fixed income at Pictet Asset Management, which oversees $5 billion of emerging-market debt. “Reasonably good credit will still be in demand, especially Indonesia and Philippine external debt.” To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net .

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Philippine Central Bank Said to Approve Sales of Dollar, Euro, Yen Bonds

December 29, 2009

By Clarissa Batino and Joel Guinto Dec. 29 (Bloomberg) — The Philippine central bank gave initial approval to the government’s plan to sell bonds denominated in dollars, euros and yen as the government’s budget deficit widens, a person with knowledge of the plan said. Monetary authorities allowed the government “in principle” to sell up to $1.5 billion of global bonds, said the person who declined to be identified before an official announcement. Separate approval was given to a plan to sell about $500 million in yen-denominated bonds, the person said. “Once the authority from the central bank is available, we can go to the market anytime,” Finance Secretary Gary Teves told reporters today in Baguio City, a province north of Manila. Such central bank approvals are needed before the government can ask investment banks to propose plans for managing the sale. The government needs to borrow to plug a deficit that may widen to 293 billion pesos ($6.3 billion) in 2010 from about 290 billion pesos this year, Teves said today. The Philippines has sold dollar-denominated bonds every January since 2005, according to data compiled by Bloomberg. The Philippines plans to raise $2 billion from the sale of overseas debt next year under a previous 2010 deficit estimate of 233.4 billion pesos. As the shortfall widens, borrowing will also increase, Teves said. The government hasn’t been “officially notified” of the central bank approval, Treasurer Roberto Tan said today from Hong Kong. Exploratory Plans The Southeast Asian nation has said it may sell euro- denominated bonds for the first time in four years in 2010, issue yen-denominated securities for the first time since 2001 and continue tapping the dollar bond market as revenue falls short of spending. The Philippines has 650 million euros ($932.9 million) of debt due in February and $561.5 million of dollar-denominated debt maturing in March, data compiled by Bloomberg show. A euro-denominated bond sale is “exploratory” and the government is still more inclined to sell dollar bonds, Teves said. “Samurai is an opportunity for us to diversify our market and to pay off some of our yen-denominated loans,” the finance chief said. To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net .

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Tank Tops, Coin Scramble, Hot Ginger Brew Mark Holidays in Manila: Travel

December 21, 2009

Travel by Yvette Fernandez Dec. 21 (Bloomberg) — It’s been 5 years since my last trip home to the Philippines at Christmas, where the season started in September when the first carols filled the air. People in this largely Catholic — and warm — country make a huge deal of Christmas. Fake snow adorns plastic fir trees throughout Manila; at air-conditioned malls, wiry Asian Santa Clauses in fur-trimmed winter reds ho-ho-ho to shoppers wearing tank tops and flip flops. Clutching their bonus envelopes, traditionally a month’s pay, parents troll the shops, trying to stretch a budget built on the daily minimum wage of 382 pesos, or about $8. The city’s ghastly traffic gets snarled even more by last- minute shoppers and revelers. As vehicles crawl along congested highways, hungry children carrying babies dart among the cars, begging for alms. The poverty is year-round. Star-shaped parols hang in Filipino homes. The colored- paper ornaments symbolize the star of Bethlehem that in the Bible led kings and shepherds to the stable where Jesus was born more than 2,000 years ago. December 16 marked the start of Simbang Gabi, nine days of masses leading up to Christmas Eve. These take place in the slightly nippy weather before dawn, around 4 a.m. Bleary-eyed churchgoers believe that if they attend all nine masses, they will be granted their secret wish. Purple Fingers Then it’s time for breakfast, bought from vendors outside the churches: puto bumbong, steamed purple fingers of ground rice coated with grated coconut and sugar, wrapped in banana leaves; bibingka, rice cakes topped with sliced duck eggs and white cheese, cooked in clay pots over hot coals; and cups of hot salabat, a potent, sinus-clearing ginger brew sweetened with brown sugar. Back home, my mother’s kitchen is buzzing as cakes and cookies are baked, boxed and sent to friends and relatives around Manila. The gifts are reciprocated and our dining table is covered with ensaymada, buttery brioche-like pastries covered with grated cheese and sugar; tubs of lenguas de gato, paper- thin butter biscuits; pastillas, sweet candies of carabao milk; and tablets of dark tsokolate to make thick, frothy hot chocolate. On Christmas Eve, families decked in their finest holiday attire gather for midnight mass. Incense perfumes the air and choirs sing as porcelain or wooden figures of the infant Jesus are placed in hay-covered mangers for altar Nativity scenes across the country. At the end of the mass, churchgoers line up to kiss the image of the newborn. Whole Pig Then it’s time for more eating and celebrating. Tables are laden with legs of sweet and salty Chinese ham; sliced Edam cheese; plump chickens stuffed with ground pork, eggs and raisins; and baskets of imported apples, oranges and grapes. Lechon is the centerpiece of more affluent, decadent celebrations: a whole pig roasted on a spit for hours till its caramel-colored skin is crunchy enough to break off with your fingers and dip in sweet liver sauce. Children prepare song-and-dance numbers to perform for the extended family of grandparents, aunts, uncles and cousins. Filipinos love to sing, so many families splurge on karaoke equipment. The older generation tosses handfuls of coins in the air while screaming children grab for money to put in their piggy banks. The celebrations end just before dawn, only to resume a few hours later. Sign of Respect On Christmas Day, children visit their godparents and other relatives, taking the hands of their elders and pressing them on their young foreheads as a sign of respect. In return, they’re handed gaily wrapped presents or envelopes filled with crisp peso bills that smell of fresh paper and ink. The merrymaking continues until New Year’s Eve when the air grows thick with a smoky haze from the noisy firecrackers that scare away evil spirits of the past year. When we were children, my male cousins used to jump in the air at midnight, hoping that would make them grow taller. I never jumped, but at 5’7’’ I’m still taller than many Filipino men I know. My late grandmother was superstitious, and she made sure we dressed in festive polka-dotted clothes to symbolize prosperity. She also reminded us to be generous with the church collection on New Year’s Day, because that meant our blessings for the coming year would be generous, too. ( Yvette Fernandez is an editor for Bloomberg News. The opinions expressed are her own.) To contact the writer on the story: Yvette Fernandez in Manila at yferreol@bloomberg.net .

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Arroyo Puts Philippine Province Under Martial Rule as Governor Is Arrested

December 5, 2009

By Francisco Alcuaz Jr. and Joel Guinto Dec. 5 (Bloomberg) — Philippine President Gloria Arroyo declared military rule in Maguindanao province, taking its governor and three relatives into custody for questioning almost two weeks after the clan was linked to the ambush of a rival’s supporters, killing 57. The takeover was announced by Executive Secretary Eduardo Ermita in a briefing in Manila today. Maguindanao Governor Andal Ampatuan Sr. and Muslim Mindanao regional Governor Zaldy Ampatuan are “under custody” after being “invited” for questioning, Philippine National Police Chief Jesus Verzosa told reporters. Two other relatives were arrested, Colonel Leo Ferrer, an Army commander in Maguindanao said in a phone interview. The regional governor is the son of the provincial governor, who heads the clan and has ruled Maguindanao since 2001, helping President Gloria Arroyo in the 2004 and 2007 elections. Another son, a Maguindanao town mayor, was arrested earlier and charged with 25 counts of murder, on testimony that he was present at and directed the killings. Military rule was required because of reports that supporters planned “hostile actions” in the event more family members were arrested, Verzosa said. “I favor the declaration, but only for a short period, until the Ampatuans have been disarmed,” Aquilino Pimentel , an opposition senator, said in a phone interview, adding three or four days may be sufficient. “The government has been slow to respond to the murders because “the whole clan has been a close ally of the president in the elections. Because of the public uproar over the killing, they were forced to take action.” President’s Duty “The president felt she simply had to do what is right in line with her solemn duty,” Press Secretary Cerge Remonde said in a mobile phone text message when asked how Arroyo authorized today’s actions, given her relationship with the family. Police this week recommended the Department of Justice file murder charges against 12 people, including the clan leader and five relatives. Justice Secretary Agnes Devanadera yesterday summoned all 12 for questioning. Governor Andal Ampatuan Sr., the clan leader, was taken from his home in Shariff Aguak, the provincial capital about 3 a.m., and is now in General Santos City, Colonel Ferrer said. Ferrer himself talked to Regional Governor Zaldy Ampatuan at 6 a.m. “over a cup of coffee.” He is now in Davao City. The two other relatives, including Maguindanao’s vice governor, were taken by the military, Ferrer said. None resisted, he said. Weapons Seized Muslim Mindanao Attorney-General Frances Cynthia Guiani- Sayadi couldn’t take a call because of high blood pressure, a person who answered her cell phone said. Today’s actions come after authorities seized weapons and ammunition in properties owned by Ampatuans, or nearby, over two days. At least one of the stockpiles was enough to arm 500 men, authorities said. They’ll investigate whether some of the arms were used in the killings and how some of them came to be in private stockpiles while having Department of National Defense markings. The Nov. 23 attack was the worst in the country’s history of political violence. About 100 armed men stopped a convoy of a political rival’s supporters on a highway, took them several hundred meters away and killed and buried them. Fifty-seven bodies were found. The dead included at least 30 journalists covering the convoy and 15 unrelated motorists, according to local media reports. United Nations The United Nations, which in 2007 linked the military to hundreds of political killings and said the government wasn’t doing enough to stop it, this week called on the government to prosecute the guilty and control political “manipulation” by clans. The National Union of Journalists of the Philippines this week started a nightly candlelit vigil for the reporters who were killed. An international day of protest is scheduled on Dec. 9, National Union Vice Chairman Jose Jaime Espina said yesterday. Parts of Maguindanao, controlled by the separatist Moro Islamic Liberation Front, aren’t subject to the declaration of martial law, Secretary Ermita said. The exemption is meant to ensure the MILF “doesn’t get involved,” Senator Pimentel said. The Ampatuans control Maguindanao, in part through militia groups authorized to help fight the MILF, the al Qaeda-linked Abu Sayyaf terrorist group, and units of the communist New People’s Army. The government said it has detained militia members while they’re under investigation for the killings, replaced and reassigned police and military officers and will swap the province’s entire police force with units from other provinces. It said it has increased troops in the province to 3,500, about 1,000 of whom are surrounding the capitol building and Ampatuan homes. To contact the reporters on this story: Francisco Alcuaz Jr . in Manila at falcuaz@bloomberg.net ; Joel Guinto at jguinto1@bloomberg.net

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Johann Hari: Dubai Has Always Been Bankrupt — Morally and Environmentally

November 28, 2009

Dubai is finally financially bankrupt – but it has been morally bankrupt all along. The idea that Dubai is an oasis of freedom on the Arabian peninsular is one of the great lies of our time. Yes, it has Starbucks and Dunkin’ Donuts and the Gucci styles, but beneath these accouterments, there is a dictatorship built by slaves. If you go there with your eyes open – as I did earlier this year – the truth is hidden in plain view. The tour books and the bragging Emiratis will tell you the city was built by Sheikh Mohammed, the country’s hereditary ruler. It is untrue. The people who really built the city can be seen in long chain-gangs by the side of the road, or toiling all day at the top of the tallest buildings in the world, in heat that Westerners are told not to stay in for more than 10 minutes. They were conned into coming, and trapped into staying. In their home country – Bangladesh or the Philippines or India – these workers are told they can earn a fortune in Dubai if they pay a large upfront fee. When they arrive, their passports are taken from them, and they are told their wages are a tenth of the rate they were promised. They end up working in extremely dangerous conditions for years, just to pay back their initial debt. They are ringed-off in filthy tent-cities outside Dubai, where they sleep in weeping heat, next to open sewage. They have no way to go home. And if they try to strike for better conditions, they are beaten by the police. I met so many men in this position I stopped counting, just as the embassies were told to stop counting how many workers die in these conditions every year after they figured it topped more than 1,000 among the Indians alone. Human Rights Watch calls this system “slavery.” Yet the Westerners who have flocked to Dubai brag that they “love” the city, because they don’t have to pay any taxes, and they have domestic slaves to do all the hard work. They train themselves not to see the pain. But Dubai’s bankruptcy does not end there: it is ecologically bust. This is a city built in the burning desert, where everything shrivels up and blows away if it is not kept artificially cold all the time. That’s why it has the highest per capita carbon emissions on earth – some 250 percent higher even than America’s. The city has to ship in desalinated water – which is more costly than oil. When it runs out of cash, it will run out of water. Today Dubai will be bailed out by the United Arab Emirates, the oil-rich country of which it is only one state. But the oil will not last forever. More importantly, there is no Bank of Morality that could provide a bailout for this sinister mirage in the desert.

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Philippines Mayor to Face Seven Murder Charges for Massacre of 57 People

November 27, 2009

By Francisco Alcuaz Jr. Nov. 27 (Bloomberg) — Philippine prosecutors are preparing to file murder charges today against a mayor allegedly linked to the massacre of at least 57 people on the southern island of Mindanao, the nation’s worst act of election-related violence. “I believe we have a very strong case,” Justice Secretary Agnes Devanadera told reporters late yesterday after Andal Ampatuan Jr. was flown from the island’s Maguindanao province to the capital, Manila, for questioning. The Ampatuan clan controls the province, where about 100 gunmen on Nov. 23 ambushed and killed backers of a politician intending to challenge the family for the post of governor in elections next year. Journalists traveling with the group were among the dead. The clan helped President Gloria Arroyo win election in 2004, when she took more than 75 percent of the vote in the province. Ampatuan, who is the mayor of Datu Unsay in Maguindanao, denied involvement in the killings after turning himself in yesterday. He said Islamic insurgents waging a separatist war in Mindanao were responsible, the Philippine Star newspaper reported today. Muslim insurgents have been fighting troops on the island for decades and the al-Qaeda-linked Abu Sayyaf militant group, blamed by the government for dozens of bombings and kidnappings, is also active there. Mindanao has the lowest per capita income of all the country’s regions. Economist Jomar Lacson , head of research at Campos, Lanuza & Co. in Manila, said while the killings may damage overseas tourism to the Philippines, the economy and financial markets won’t be affected because there’s little investment in the area. Private Militias The massacre has increased pressure on Arroyo’s administration to crack down on provincial politicians who maintain private militias. While armed to help police and the army fight Muslim and communist insurgents, the militias are often used by local leaders as private armies as they feud with rivals. The Makati Business Club , a Manila-based association of the nation’s biggest businesses, said in a statement yesterday Arroyo’s administration had allowed “warlord politics” to flourish in Maguindanao. Authorities yesterday detained 347 Maguindanao militiamen for questioning about their possible involvement in the killings and suspended civilians’ permits to carry firearms in the province, officials said. The ambushed convoy was mostly made up of supporters of Buluan City Vice Mayor Esmael Mangudadatu, who were on their way to file his candidacy for Maguindanao governor. Mass Graves Fifty-seven bodies have been recovered from mass graves, among them 27 journalists who were part of the convoy, Agence France-Presse reported today. Fifteen motorists who were driving past the area were killed as the gunmen sought to eliminate witnesses, according to the report. Mangudadatu wasn’t in the convoy because he’d received death threats and had sent his wife and two sisters to submit his papers in the belief that women wouldn’t be targeted. He filed his candidacy today in the provincial capital of Sharrif Aguak, escorted by soldiers, a police commander and army general, the Associated Press reported. “Only death can stop me from running,” AP cited Mangudadatu as saying. Maguindanao and the neighboring province of Sultan Kudarat are under a state of emergency to prevent further violence and police are on alert for attacks on the homes of Ampatuan and Mangudadatu family members living outside the province, including in Manila. Philippine elections are often marred by bloodshed. About 126 candidates and supporters were killed in the months leading to the 2007 elections and 186 in 2004, according to the Philippine Daily Inquirer . To contact the reporter on this story: Francisco Alcuaz Jr . in Manila at falcuaz@bloomberg.net .

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Philippine Local Police Chief Detained After 46 Dead in Political Massacre

November 24, 2009

By Cecilia Yap and Joel Guinto Nov. 25 (Bloomberg) — Philippine authorities detained a provincial police chief and deployed 1,000 soldiers to search for suspects after gunmen killed 46 people in one of the worst acts of political violence in the nation’s history. Abusana Maguid, the police chief of Maguindanao province, was relieved of his duties after witnesses saw three of his officers at the scene of the attack two days ago on the southern island of Mindanao, National Police spokesman Leonardo Espina said yesterday. Maguid may bear “command responsibility” for the actions of his officers, who were also detained, Espina said. “All who are responsible will be made accountable. There will be no sacred cows.” President Gloria Arroyo yesterday put Maguindanao and neighboring Sultan Kudarat province under a state of emergency and vowed to hunt down those behind the massacre. Many of the victims, among them women and journalists, were found in a mass grave after about 100 gunmen stopped a convoy of people on their way to file a local politician’s application to run for provincial governor, the military said. The killings represent the worst single incident of election-related violence in the nation’s history, according to the Philippine Center for Investigative Journalism . United Nations Secretary-General Ban Ki-moon “condemns this heinous crime committed in the context of a local election campaign,” his office said in a statement . Ban hopes that “no effort will be spared to bring justice and to hold the perpetrators accountable.” Vice Mayor Buluan City Vice Mayor Esmael Mangudadatu, who planned to run for provincial governor in elections next year, wasn’t in the convoy that came under attack. He told local media his wife was killed and that some of the women in the group were raped before they were murdered. The military has said that backers of a rival candidate may have been involved. Jesus Dureza , Arroyo’s adviser on Mindanao affairs, said he has met with the Mangudadatu family and relatives of Maguindanao Governor Andal Ampatuan. The two families, who were once allies, are now political rivals, the Philippine Daily Inquirer said. The Mangudadatus pleaded for justice, Dureza said in a phone interview late yesterday before he was cut off. The Ampatuans pledged to cooperate with any investigation, he said in a GMA News TV interview. “No effort will be spared to bring justice to the victims and hold the perpetrators accountable,” Arroyo said yesterday. She deployed extra troops and ordered Director General Jesus Versoza, the national police chief, to lead the investigation into the killings. Bodies Exhumed Twenty-four bodies were exhumed yesterday, bringing the death toll to 46, Chief Superintendent Josefino Cataluna, central Mindanao police director, said in a phone interview. Police will continue to dig at the site where the bodies were found, he said. Some 1,000 soldiers have been deployed to search for the suspects and secure Maguindanao’s “exit points,” Romeo Brawner , the armed forces spokesman, told reporters in Manila. Arroyo declared a state of emergency to prevent further violence in the region, Press Secretary Cerge Remonde said at a briefing in Manila. The last time an area in Mindanao was placed under a state of emergency was March 31, when militants from the Islamist Abu Sayyaf group threatened to behead one of three Red Cross workers who were taken hostage. Emergency Rule Declaring a state of emergency gives the president the authority to use the military to quell violence, Cabinet Secretary Silvestre Bello III said in the same briefing. It may also give the president the legal basis to suspend the privilege of the writ of habeas corpus, he said. The writ allows courts to require the military or police to present persons they are holding and justify their detention. At least 12 journalists were among those killed, Reporters Without Borders said. “Never in the history of journalism have the news media suffered such a heavy loss of life in one day,” the Paris-based organization said in a statement, alleging there is a “culture of impunity and violence in the Philippines, especially in Mindanao.” Elections in the Philippines are often marred by bloodshed, with provincial politicians maintaining private militias. About 126 candidates and supporters were killed in the months leading to the 2007 elections and 186 in 2004, according to the Inquirer . The Southeast Asian nation will choose a new president and thousands of national and local officials in May. The nation’s Commission on Elections will accept filings for candidacies until Dec. 1. Mindanao is home to most of the nation’s Muslim minority some of whom have been fighting a separatist war for decades. It’s also home to the al-Qaeda-linked militant group Abu Sayyaf and other groups engaged in kidnapping and other forms of terrorism. To contact the reporters on this story: Cecilia Yap in Manila at cyap19@bloomberg.net ; Joel Guinto in Manila at jguinto1@bloomberg.net .

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Stocks in Europe, Asia Advance on Economic Outlook; Gold Climbs to Record

November 23, 2009

By Glenys Sim and Shani Raja Nov. 23 (Bloomberg) — Asian and European stocks rose, gold climbed to a record and the Australian dollar led gains in Asian currencies on signs economic recovery is gathering pace. Rio Tinto Group , the world’s third-largest mining company, led a 1 percent advance in the MSCI Asia Pacific excluding Japan Index to 411.39 as of 5:13 p.m. in Tokyo. Gold for immediate delivery jumped as much as 1.4 percent to a record $1,166.66 an ounce as investors sought alternatives to the U.S. dollar, which weakened against all 16 most-traded currencies tracked by Bloomberg. Copper and oil prices also rose. Economic reports this week will show rising export orders in Taiwan and South Korea and faster economic growth in the Philippines, according to Bloomberg News economist surveys. In the U.S., data will indicate personal spending, durable goods orders and home sales climbed, separate surveys show. “People remain positive that the recovery is in place,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “But we’re not getting carried away. Valuations are fairly reflective of a bullish economic environment, and you don’t need much in terms of softer-than- anticipated growth or a withdrawal of stimulus measures to make investors nervous.” Mining companies led a 0.7 percent gain in Australia’s S&P/ASX 200 Index . Rio Tinto rose 3.6 percent to A$73.78. Newcrest Mining Ltd. , Australia’s largest gold producer, added 3.2 percent to A$37.00. Japan’s markets were shut for a holiday . Australian Dollar, Gold James Hardie Industries NV , the top seller of home siding in the U.S., surged 6.4 percent to A$7.87 after forecasting full-year earnings at the top of a range of analyst estimates. The National Association of Realtors will report purchases of existing homes rose 2.3 percent in October to an annual pace of 5.7 million, the highest level since July 2007, according to a Bloomberg survey before a report today. Europe’s Dow Jones Stoxx 600 Index climbed 1.1 percent and Standard & Poor’s 500 Index futures added 0.8 percent. The S&P 500, the benchmark gauge for American equities, rallied in the last two hours of trading on Nov. 20, paring its loss for the day to 0.3 percent from as much as 0.7 percent. Hong Kong’s Hang Seng Index rose 1 percent to 22,689.98 after Wen Wei Po newspaper reported a government economist as saying China’s economy may grow more than 10 percent in the fourth quarter. China Construction Bank Corp. and Industrial & Commercial Bank of China Ltd. , the nation’s two biggest lenders, added more than 2 percent. The Australian dollar strengthened 0.7 percent to 92.13 U.S. cents. South Africa’s rand rose 1.5 percent to 7.4998 per dollar. The euro climbed 0.7 percent against the greenback to $1.4958. New Zealand’s dollar gained 0.7 percent to 72.92 U.S. cents. ‘Very Upbeat’ Gold has risen 32 percent this year as the Dollar Index , a gauge of the currency’s value against six major trading partners, fell 7.2 percent. The most accurate forecasters predict the U.S. currency will extend its drop as the world’s lowest borrowing costs, rising unemployment and a record $4 trillion of government bond sales in 2009 and 2010 weigh on the dollar. Copper advanced 2.1 percent to $6,989 a metric ton and zinc gained 2.7 percent to $2,315 a ton. “Sentiment is very upbeat,” Stefan Graber , a Singapore- based analyst at Credit Suisse Group, said by phone today. “Investor interest has spilled over from those seeking a hedge against the dollar to other buying interests as well, such as central bank purchases.” Crude oil rose 2.3 percent to $78.45 a barrel in New York on speculation demand will increase as Asia leads the rebound from the first global recession since World War II. Oil, OECD “The market’s looking ahead in terms of recovery in demand,” said Toby Hassall , a research analyst with CWA Global Markets Pty in Sydney. “It does not look like the U.S. will come out of this slump before a lot of other economies.” The Organization for Economic Cooperation and Development on Nov. 19 raised the forecast for 2010 growth in its 30 member countries to 1.9 percent from a previous target of 0.7 percent, with China leading the expansion. Taiwan’s export orders grew 4 percent in October, compared with a decline of 3 percent in the previous month, according to a Bloomberg News survey of 10 analysts before the statistics bureau releases data today. The Philippines will report accelerating third-quarter economic growth on Nov. 26, a separate survey of six analysts showed. Thailand’s government said today gross domestic product shrank at a slower pace in the third quarter from a year-earlier than in the previous three months. U.S. Spending U.S. personal spending increased 0.5 percent after dropping by the same amount in September, according to the median estimate of 61 economists surveyed by Bloomberg News before a Commerce Department report due Nov. 25. Treasury futures were little changed as the U.S. prepares to sell a record $118 billion of notes in three auctions starting today. The offerings begin with $44 billion of two- year notes, raising speculation yields near a record low will curtail demand. The yield on 10-year futures contracts for December delivery was at 3.65 percent, based on electronic transactions at the Chicago Board of Trade. The cost of protecting Australian corporate bonds from default fell 2 basis points to 91.5 basis points, according to Citigroup Inc. The Markit iTraxx Australia index peaked at 443 basis points on March 10, CMA DataVision prices show. To contact the reporter on the story: Shani Raja in Sydney at sraja4@bloomberg.net .

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Dollar, Yen Strengthen as Topix Falls on Japan Equity Sales; Kiwi Declines

November 18, 2009

By Akiko Ikeda and Chan Tien Hin Nov. 19 (Bloomberg) — The dollar and yen strengthened and the Topix Index fell for a seventh day as companies tapped equity markets to ride out a slump in the world’s second-largest economy. The New Zealand dollar weakened. The Topix lost 1.8 percent to 834.85 as of 12:31 p.m. in Tokyo, suffering its longest losing streak since July, as Mitsubishi UFJ Financial Group Inc. and Nomura Real Estate Residential Fund Inc. filed to sell shares. The dollar and yen rose against at least 14 out of the 16 most-traded currencies, according to data compiled by Bloomberg. Stock declines in the region were limited after Maxis Bhd. climbed as much as 10 percent on its trading debut in Malaysia. The ratio of investors who want to be “overweight” Japanese stocks during the next year against those who plan to be “underweight” dropped this month to the lowest level since November 2002, according to a report dated yesterday from Bank of America Corp.’s Merrill Lynch & Co. brokerage. Japan’s economy is a drag in the region that’s leading the recovery from the first global recession since World War II. Singapore today forecast growth of as much as 5 percent in 2010. “There’s no reason to buy into Japan,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Domestic investors are looking more at foreign countries since Japan lacks any clear potential for growth.” Dollar, Yen, Gold The dollar rose 0.3 percent versus the euro to $1.4924 and the yen strengthened 0.5 percent against the 16-nation European currency to 133.04. Gold, a hedge against a decline in the dollar, dropped 0.26 percent after reaching a record $1,153.40 an ounce yesterday. “Gold’s looking a bit overbought,” Lin Yuhui , deputy general manager at Jinhui Futures Co., said from Shenzhen. New Zealand’s dollar, known as the kiwi for the flightless bird on its currency, fell against all major counterparts after an opposition political party said it no longer supported the central bank’s efforts to target inflation. “The system we have causes widespread damage to the tradable sector,” Labour Party leader Phil Goff said today in Wellington. “The battle against inflation is no longer New Zealand’s sole over-riding policy objective.” The kiwi fell along with the Australian dollar, which weakened for a third day against the U.S. currency, losing 0.5 percent. Mitsubishi UFJ declined 4.1 percent to 464 yen after filing with regulators to raise as much as 1 trillion yen ($11.2 billion) in its second share sale since January as regulators demand banks bolster capital. A sale of that size would be Japan’s biggest public sale of additional common shares, Bloomberg data show. Nomura Real Estate Nomura Real Estate sank 7 percent to 358,000 yen. It plans to raise as much as 11.5 billion yen from a sale of new shares, according to a filing with Japan’s Finance Ministry. The drop in Japanese shares dragged the MSCI Asian Pacific Index to a 0.9 percent decline to 117.55. The MSCI Emerging Markets Asia Index rose 0.3 percent to a 16-month high before slipping 0.2 percent to 412.80. Maxis , Malaysia’s biggest mobile-phone operator, jumped to as much as 5.50 ringgit ($1.63) in its first day of trading in Kuala Lumpur after its $3.3 billion initial public offering this month. Grand Korea Leisure Co. , which started trading on the Korea Exchange, surged 35 percent to 16,150 won ($13.96) from the initial share price of 12,000 won. The company was rated “buy” as Daewoo Securities Co. initiated coverage with a 16,000 won price target. Asia’s Growth The International Monetary Fund raised its forecast for growth in the global economy next year to 3.1 percent from 2.5 percent, led by a 9 percent expansion in China and 6.4 percent in India, the Washington-based organization said on Oct. 1. That compares with growth of 1.7 percent in Japan, 1.5 percent in the U.S. and 0.3 percent in the euro region. “Money is flowing to Asia to take advantage of its stronger and more resilient growth,” Jason Chong , who helps oversee $1.6 billion as Chief Investment Officer at UOB-OSK Asset Management in Kuala Lumpur. “If you look at the world population, 60 percent of the world population is in Asia. It is this trend of increasing domestic consumption that will make Asia more resilient in terms of growth going forward.” Singapore’s economy will expand 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year, the trade ministry said today. Gross domestic product jumped at a revised annualized rate of 14.2 percent last quarter from the previous three months, the second consecutive climb. Malaysia’s ringgit and Indonesia’s rupiah led declines in Asian currencies on speculation policy makers will restrain gains to support exports. The ringgit dropped 0.3 percent to 3.3770 per dollar. The rupiah declined 1.1 percent to 9,483. Central Banks Wary “Most of the traders are aware central banks in this region have been quite wary of the strength in local currencies,” said Tetsuo Yoshikoshi , a senior economist in Singapore at Sumitomo Mitsui Banking Corp. “The over-extension of the strengthening has triggered some kind of a correction.” Rubber futures in Tokyo climbed as much as 2.5 percent to the highest in almost 14 months as shippers in Thailand, the largest producer, raised prices. “Heavy rains hinder tapping,” said Takaki Shigemoto , a commodity analyst at research and investment company JSC Corp. The April-delivery contract rose as much as 6 yen to 244.40 yen a kilogram. Rice futures advanced for a second day after Thai Prime Minister Abhisit Vejjajiva said yesterday that India was seeking to buy as much as 2 million metric tons. The Philippines, the world’s top importer, has also advanced purchases this month after storms damaged local crops. The January-delivery contract on the Chicago Board of Trade gained as much as 0.3 percent to $15.24 per 100 pounds. To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net ; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net .

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Dollar, Yen Strengthen as Topix Falls on Japan Equity Sales; Kiwi Declines

November 18, 2009

By Akiko Ikeda and Chan Tien Hin Nov. 19 (Bloomberg) — The dollar and yen strengthened and the Topix Index fell for a seventh day as companies tapped equity markets to ride out a slump in the world’s second-largest economy. The New Zealand dollar weakened. The Topix lost 1.8 percent to 834.85 as of 12:31 p.m. in Tokyo, suffering its longest losing streak since July, as Mitsubishi UFJ Financial Group Inc. and Nomura Real Estate Residential Fund Inc. filed to sell shares. The dollar and yen rose against at least 14 out of the 16 most-traded currencies, according to data compiled by Bloomberg. Stock declines in the region were limited after Maxis Bhd. climbed as much as 10 percent on its trading debut in Malaysia. The ratio of investors who want to be “overweight” Japanese stocks during the next year against those who plan to be “underweight” dropped this month to the lowest level since November 2002, according to a report dated yesterday from Bank of America Corp.’s Merrill Lynch & Co. brokerage. Japan’s economy is a drag in the region that’s leading the recovery from the first global recession since World War II. Singapore today forecast growth of as much as 5 percent in 2010. “There’s no reason to buy into Japan,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Domestic investors are looking more at foreign countries since Japan lacks any clear potential for growth.” Dollar, Yen, Gold The dollar rose 0.3 percent versus the euro to $1.4924 and the yen strengthened 0.5 percent against the 16-nation European currency to 133.04. Gold, a hedge against a decline in the dollar, dropped 0.26 percent after reaching a record $1,153.40 an ounce yesterday. “Gold’s looking a bit overbought,” Lin Yuhui , deputy general manager at Jinhui Futures Co., said from Shenzhen. New Zealand’s dollar, known as the kiwi for the flightless bird on its currency, fell against all major counterparts after an opposition political party said it no longer supported the central bank’s efforts to target inflation. “The system we have causes widespread damage to the tradable sector,” Labour Party leader Phil Goff said today in Wellington. “The battle against inflation is no longer New Zealand’s sole over-riding policy objective.” The kiwi fell along with the Australian dollar, which weakened for a third day against the U.S. currency, losing 0.5 percent. Mitsubishi UFJ declined 4.1 percent to 464 yen after filing with regulators to raise as much as 1 trillion yen ($11.2 billion) in its second share sale since January as regulators demand banks bolster capital. A sale of that size would be Japan’s biggest public sale of additional common shares, Bloomberg data show. Nomura Real Estate Nomura Real Estate sank 7 percent to 358,000 yen. It plans to raise as much as 11.5 billion yen from a sale of new shares, according to a filing with Japan’s Finance Ministry. The drop in Japanese shares dragged the MSCI Asian Pacific Index to a 0.9 percent decline to 117.55. The MSCI Emerging Markets Asia Index rose 0.3 percent to a 16-month high before slipping 0.2 percent to 412.80. Maxis , Malaysia’s biggest mobile-phone operator, jumped to as much as 5.50 ringgit ($1.63) in its first day of trading in Kuala Lumpur after its $3.3 billion initial public offering this month. Grand Korea Leisure Co. , which started trading on the Korea Exchange, surged 35 percent to 16,150 won ($13.96) from the initial share price of 12,000 won. The company was rated “buy” as Daewoo Securities Co. initiated coverage with a 16,000 won price target. Asia’s Growth The International Monetary Fund raised its forecast for growth in the global economy next year to 3.1 percent from 2.5 percent, led by a 9 percent expansion in China and 6.4 percent in India, the Washington-based organization said on Oct. 1. That compares with growth of 1.7 percent in Japan, 1.5 percent in the U.S. and 0.3 percent in the euro region. “Money is flowing to Asia to take advantage of its stronger and more resilient growth,” Jason Chong , who helps oversee $1.6 billion as Chief Investment Officer at UOB-OSK Asset Management in Kuala Lumpur. “If you look at the world population, 60 percent of the world population is in Asia. It is this trend of increasing domestic consumption that will make Asia more resilient in terms of growth going forward.” Singapore’s economy will expand 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year, the trade ministry said today. Gross domestic product jumped at a revised annualized rate of 14.2 percent last quarter from the previous three months, the second consecutive climb. Malaysia’s ringgit and Indonesia’s rupiah led declines in Asian currencies on speculation policy makers will restrain gains to support exports. The ringgit dropped 0.3 percent to 3.3770 per dollar. The rupiah declined 1.1 percent to 9,483. Central Banks Wary “Most of the traders are aware central banks in this region have been quite wary of the strength in local currencies,” said Tetsuo Yoshikoshi , a senior economist in Singapore at Sumitomo Mitsui Banking Corp. “The over-extension of the strengthening has triggered some kind of a correction.” Rubber futures in Tokyo climbed as much as 2.5 percent to the highest in almost 14 months as shippers in Thailand, the largest producer, raised prices. “Heavy rains hinder tapping,” said Takaki Shigemoto , a commodity analyst at research and investment company JSC Corp. The April-delivery contract rose as much as 6 yen to 244.40 yen a kilogram. Rice futures advanced for a second day after Thai Prime Minister Abhisit Vejjajiva said yesterday that India was seeking to buy as much as 2 million metric tons. The Philippines, the world’s top importer, has also advanced purchases this month after storms damaged local crops. The January-delivery contract on the Chicago Board of Trade gained as much as 0.3 percent to $15.24 per 100 pounds. To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net ; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net .

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Convergys continues to expand, to hire 4,500 agents in Philippines

November 17, 2009

Convergys continues to expand, to hire 4,500 agents in Philippines

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Remittances to Philippines up 8.6% in September

November 16, 2009

Remittances to Philippines up 8.6% in September

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APEC Leaders Agree to Maintain Economic Stimulus Until `Durable’ Recovery

November 15, 2009

By Shamim Adam Nov. 15 (Bloomberg) — Asia-Pacific leaders said the economic recovery isn’t on a “solid footing” yet, pledging to maintain stimulus measures until there is “durable” growth. Economies must shift toward a more balanced expansion strategy in the aftermath of the global crisis and cannot return to “growth as usual,” the leaders from the 21-member Asia-Pacific Economic Cooperation group said today in a statement. APEC will also take steps and determine ways to realize its vision of a regional free trade area, they said. “Our robust policy responses have helped to set the stage for recovery,” the leaders said. “But economic recovery is not yet on a solid footing. We will maintain stimulus policies until a durable economic recovery has clearly taken hold.” Policy makers are moving to unwind some of the emergency steps they took to counter the world recession after cutting interest rates and outlaying more than $2 trillion in government expenditure. APEC leaders this week said fiscal and monetary stimulus measures need separate exit strategies and timing, as countries seek a balance between protecting nascent growth and preventing asset bubbles. The statement did not mention currencies. APEC finance ministers earlier this week called for market-oriented exchange rates. The call comes as pressure rises on China, the world’s third-largest economy, to abandon its currency’s fix to the dollar maintained since July 2008. ‘Not Yet Solid’ “The profound impact of the international financial crisis still persists,” China’s President Hu Jintao told APEC leaders in Singapore today. “The foundation is not yet solid for the world economic upturn.” APEC was set up in 1989 to advance trade in the region. The group faces “political” hurdles in its long-term vision to form a region-wide free trade area, Singapore Prime Minister Lee Hsien Loong said yesterday. The U.S. said yesterday it will enter into discussions with the four countries that are part of the Trans-Pacific Strategic Economic Partnership Agreement, an accord aimed at removing trade barriers among its members. APEC is already falling behind on some goals even as it strives for other agreements. Members in 1994 signed the so- called Bogor Declaration, pledging to create free and open trade in the group’s developed economies by 2010 and in its emerging economies by 2020. Bogor Goals “We reaffirm our commitment to the Bogor Goals of free and open trade and investment,” the leaders said. “We direct ministers and officials to report to us next year with a meaningful assessment of the industrialised APEC economies’ achievement of the Bogor Goals.” APEC’s developed members should adhere to the group’s goal for free trade by next year, Chinese Commerce Minister Chen Deming said Nov. 13. Singapore’s Lee has said that next year’s target is not likely to be met. Leaders also pledged to “exercise all possible flexibility” to accelerate negotiations and complete the eight-year-old World Trade Organization’s Doha Round of talks in 2010. “We strongly reaffirm that the most effective means of dealing with protectionist pressures and delivering a global stimulus package to sustain and secure our recovery is an ambitious and balanced conclusion to Doha in 2010,” they said. Climate Change APEC leaders reaffirmed their commitment to reaching an “ambitious outcome” on climate change in Copenhagen next month. An earlier draft of the statement said global emissions will need to peak over the next few years and be reduced to 50 percent below 1990 levels by 2050, with a later timeframe for peaking in developing countries. The final statement excluded that reference. APEC’s biggest economies are the U.S., Japan and China. Other members are Australia, Brunei, Canada, Chile, Hong Kong, Indonesia, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, and Vietnam. To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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Dollar Overwhelms Central Banks From Brazil to Korea as Reserves Increase

November 13, 2009

By Oliver Biggadike and Matthew Brown Nov. 13 (Bloomberg) — Brazil, South Korea, Russia and other developing nations are fighting a losing battle to mute gains in their currencies as a falling dollar and economic recovery create more demand for their assets than central banks can handle. South Korea Deputy Finance Minister Shin Je Yoon said yesterday the country will leave the level of its currency to market forces after adding about $63 billion to its foreign exchange reserves this year to slow the appreciation of the won. Chile Finance Minister Andres Velasco said the same day that lawmakers approved an increase in local debt sales to finance spending, a move that will allow the government to keep more of its dollar-based savings overseas and slow the peso’s rally. Governments are amassing record foreign-exchange reserves as they direct central banks to buy dollars in an attempt to stem the greenback’s slide and keep their currencies from appreciating too fast and making their exports too expensive. Half of the 10-best performers in the currency market this year came from developing markets, gaining at least 14 percent on average, according to data compiled by Bloomberg. “It looked for a while like the Bank of Korea was trying to defend 1,200, but it looks like they’ve given up and are just trying to slow the advance,” said Collin Crownover , head of currency management in London at State Street Global Advisors, which has $1.7 trillion under management. The won, after falling 44 percent against the dollar in March 2009 from its 10-year high of 899.69 to the dollar in October 2007, is now headed for its biggest annual rally since a 15 percent gain in 2004. It traded today at 1,160.32, up 8.6 percent since the end of December. ‘Suffered Tremendously’ Brazil’s real is up 1.6 percent this month, even after imposing a tax in October on foreign stock and bond investments and increasing foreign reserves by $9.5 billion in October in an effort to curb the currency’s appreciation. The real has risen 33 percent this year. “We have to be careful that our exchange rate doesn’t appreciate too much as to deindustrialize the country,” Marcos Verissimo , chief of staff at Brazil’s state development bank known as BNDES, said yesterday at a conference in Sao Paulo. “The capital goods industry has suffered tremendously.” Russia’s Bank Rossii increased its foreign reserves by 15 percent since March 13 as it sold rubles in an attempt to cap the currency’s gain. Even so, the surge in commodities prices this year means Russia’s steps to fight a stronger ruble may “not be productive,” the International Monetary Fund said yesterday. Energy, including oil and natural gas, accounted for 69.5 percent of exports to countries outside the former Soviet Union and the Baltic states in the first nine months, according the Federal Customs Service. Dollar Index “There are changes in the underlying factors that call for a more appreciated exchange rate,” Odd Per Brekk , the Washington-based IMF’s senior representative in Russia, told reporters. Intercontinental Exchange Inc.’s U.S. Dollar Index , which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, touched 74.774 on Nov. 11, the lowest level since August 2008, and has fallen 16 percent from the high this year of 89.624 on March 4 to 75.550 today. Much of the greenback’s decline stems from investors borrowing funds in the U.S., where the target benchmark interest rate is between zero and 0.25 percent. They then invest the proceeds in countries with higher rates and faster growing economies. World Bank, France World Bank President Robert Zoellick said the recent fall of the dollar is a response to the currency’s earlier rise and to market dynamics, giving the U.S. few near-term options for changing its course. The value of the dollar depends on confidence in dollar- denominated assets and also to the movements of other currencies, Zoellick told Asia-Pacific business leaders in Singapore today. The dollar grew in value during the height of the financial crisis because investors viewed it as a safe haven, he said. France’s Finance Minister Christine Lagarde said in an interview in Singapore today that her government favors a “strong” dollar as an appreciating euro threatens to hurt European exports. International Investment An unprecedented net $47 billion flowed into equities in India, Indonesia, the Philippines, South Korea, Taiwan and Thailand in the last three quarters, according to data compiled by Bloomberg. That eclipsed the previous full-year high of $33 billion in 2005, nine year of data show. “The dollar is weakening because the U.S. has the lowest short-term interest rates in the world will be the sell side of the carry trade as long as that remains true,” Chris Low, chief economist at FTN Financial in New York, wrote in a note to clients yesterday. Chile’s peso has strengthened 26 percent this year versus the dollar, the second-biggest gain among Latin American currencies after the 33 percent rise in the Brazilian real. South Korea’s economy expanded 6 percent in the nine months ended in September, the fastest rate since it grew 6.9 percent during the same period in 2002. The rebound came as companies such as Hyundai Motor Co. in Seoul and Samsung Electronics Co. in Suwon reported surging profits driven by exports. ‘Hard to Fight’ Brazil’s economy emerged from a recession in the second quarter, swinging to a 1.9 percent expansion after six months of contraction, a Sept. 11 report from the statistics agency showed. Six straight months of job growth, coupled with tax breaks and record low borrowing costs, pushed up consumer spending and helped Latin America’s largest economy rebound from the global financial crisis. “I hear a lot of noise reflecting the government’s discomfort with the exchange rate, but it is hard to fight this,” said Rodrigo Azevedo , the monetary policy director of Brazil’s central bank from 2004 to 2007. “There is very little Brazil can do,” said Azevedo, who runs $1.8 billion at JGP SA in Rio de Janeiro, in an Oct. 16 interview. To contact the reporter on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net Matthew Brown in London at brown42@bloomberg.net

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Dollar Decline Too Powerful for Brazil, Korea as Currency Reserves Mount

November 12, 2009

By Oliver Biggadike and Matthew Brown Nov. 13 (Bloomberg) — Brazil, South Korea, Russia and other developing nations are fighting a losing battle to mute gains in their currencies as a falling dollar and economic recovery create more demand for their assets than central banks can handle. South Korea Deputy Finance Minister Shin Je Yoon said yesterday the country will leave the level of its currency to market forces after adding about $63 billion to its foreign exchange reserves this year to slow the appreciation of the won. Chile Finance Minister Andres Velasco said the same day that lawmakers approved an increase in local debt sales to finance spending, a move that will allow the government to keep more of its dollar-based savings overseas and slow the peso’s rally. Governments are amassing record foreign exchange reserves as they direct central banks to buy dollars in an attempt to stem the greenback’s slide and keep their currencies from appreciating too fast and making their exports too expensive. Half of the 10-best performers in the currency market this year came from developing markets, gaining at least 14 percent on average, according to data compiled by Bloomberg. “It looked for a while like the Bank of Korea was trying to defend 1,200, but it looks like they’ve given up and are just trying to slow the advance,” said Collin Crownover , head of currency management in London at State Street Global Advisors, which has $1.7 trillion under management. The won, after falling 44 percent against the dollar in March 2009 from its 10-year high of 899.69 to the dollar in October 2007, is now headed for its biggest annual rally since a 15 percent gain in 2004. It closed yesterday at 1,157.50 in New York, up 8.5 percent since the end of December. ‘Suffered Tremendously’ Brazil’s real is up 1.78 percent this month, even after imposing a tax in October on foreign stock and bond investments and increasing foreign reserves by $9.5 billion in October in an effort to curb the currency’s appreciation. The real has risen 33 percent this year. “We have to be careful that our exchange rate doesn’t appreciate too much as to deindustrialize the country,” Marcos Verissimo , chief of staff at Brazil’s state development bank known as BNDES, said yesterday at a conference in Sao Paulo. “The capital goods industry has suffered tremendously.” Russia’s Bank Rossii increased its foreign reserves by 15 percent since March 13 as it sold rubles in an attempt to cap the currency’s gain. Even so, the surge in commodities prices this year means Russia’s steps to fight a stronger ruble may “not be productive,” the International Monetary Fund said yesterday. Energy, including oil and natural gas, accounted for 69.5 percent of exports to countries outside the former Soviet Union and the Baltic states in the first nine months, according the Federal Customs Service. Dollar Index “There are changes in the underlying factors that call for a more appreciated exchange rate,” Odd Per Brekk , the Washington-based IMF’s senior representative in Russia, told reporters. Intercontinental Exchange Inc.’s U.S. Dollar Index , which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, touched 74.774 on Nov. 11, the lowest level since August 2008 and down 16.6 percent from the high this year of 89.624 on March 4. Much of the greenback’s decline stems from investors borrowing funds in the U.S., where the target benchmark interest rate is between 0 and 0.25 percent. They then invest the proceeds in countries with higher rates and faster growing economies. International Investment An unprecedented net $47 billion flowed into equities in India, Indonesia, the Philippines, South Korea, Taiwan and Thailand in the last three quarters, according to data compiled by Bloomberg. That eclipsed the previous full-year high of $33 billion in 2005, nine year of data show. “The dollar is weakening because the U.S. has the lowest short-term interest rates in the world will be the sell side of the carry trade as long as that remains true,” Chris Low, chief economist at FTN Financial in New York, wrote in a note to clients yesterday. Chile’s peso has strengthened 26 percent this year versus the dollar, the second-biggest gain among Latin American currencies after the 33 percent rise in the Brazilian real. South Korea’s economy expanded 6 percent in the nine months ended in September, the fastest rate since it grew 6.9 percent during the same period in 2002. The rebound came as companies such as Hyundai Motor Co. in Seoul and Samsung Electronics Co. in Suwon reported surging profits driven by exports. ‘Hard to Fight’ Brazil’s economy emerged from a recession in the second quarter, swinging to a 1.9 percent expansion after six months of contraction, a Sept. 11 report from the statistics agency showed. Six straight months of job growth, coupled with tax breaks and record low borrowing costs, pushed up consumer spending and helped Latin America’s largest economy rebound from the global financial crisis. “I hear a lot of noise reflecting the government’s discomfort with the exchange rate, but it is hard to fight this,” said Rodrigo Azevedo , the monetary policy director of Brazil’s central bank from 2004 to 2007. “There is very little Brazil can do,” said Azevedo, who runs $1.8 billion at JGP SA in Rio de Janeiro, in an Oct. 16 interview. To contact the reporter on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net Matthew Brown in London at brown42@bloomberg.net

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European Stocks Rise for Fifth Day; HSBC Shares Gain, Barclays, CRH Drop

November 10, 2009

By Sarah Jones Nov. 10 (Bloomberg) — European stocks climbed for a fifth day as earnings from HSBC Holdings Plc, the region’s biggest bank, overshadowed concern a report may show German investor confidence retreated for a second month. HSBC gained 3.6 percent as the lender said third-quarter profit was “significantly” higher than a year ago on lower loan provisions. Barclays Plc fell 2 percent after the U.K.’s second-largest bank posted a 54 drop in net income on higher impairment charges. CRH Plc slid 2.8 percent as the world’s second-largest maker and distributor of building materials forecast profit this year will fall as much as 55 percent. Europe’s Dow Jones Stoxx 600 Index rose 0.3 percent to 246.39 at 9:19 a.m. in London. The gauge has advanced 56 percent since March 9 amid speculation government stimulus measures and record-low interest rates are helping to drag the economy out of recession. A report today may show German investor confidence fell in November as the prospect of expiring government stimulus programs and rising unemployment tempered expectations for economic growth. The ZEW Center for European Economic Research’s index of investor and analyst expectations slipped to 55 from 56 in October, according to the median of 39 forecasts in a Bloomberg News survey. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim today. U.S., Asian Stocks Futures on the U.S. Standard & Poor’s 500 Index expiring in December slipped 0.1 percent, indicating the benchmark for U.S. equities may fall for the first time in seven days. U.S. stocks surged yesterday after the Group of 20 nations agreed to maintain economic stimulus efforts. The MSCI Asia Pacific Index advanced 0.4 percent as Chinese car sales jumped and exports improved in Taiwan and the Philippines. HSBC rallied 3.6 percent to 717.4 pence as the bank said impairments declined in the third quarter to the lowest level since the first half of 2008. Profit so far this year is higher than 2008 on an underlying basis that excludes movements in fair value on the bank’s debt, HSBC said. Barclays retreated 2 percent to 335.85 pence after posting a 54 percent drop in third-quarter net income to 1.08 billion pounds ($1.8 billion) and saying nine-month impairments were “significantly above” the year-earlier period. Impairments for the full year are “expected to be around the bottom end of the previously referenced 2009 consensus range of 9 billion pounds to 9.6 billion pounds” made in August, the bank said. CRH Drops CRH sank 2.8 percent to 17.40 euros in Dublin after forecasting lower profit on costs to cut jobs and as poor weather in parts of the U.S. hampered construction. Pretax profit will probably reach 730 million euros to 760 million euros, compared with 1.63 billion euros in 2008 and exchange- rate losses will also weigh on earnings, CRH said. Strategists at Credit Suisse recommended investors increase their holdings in mainland European shares, upgrading the region to “overweight” from “underweight.” “Continental Europe tends to outperform when both global lead indicators rise and earnings are being revised up, a combination we expect to continue into the first half of 2010,” strategists including Andrew Garthwaite wrote in a report today. “Europe tends to outperform when interest rate expectations start to rise.” To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net .

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Asian Stocks Rise as Exports Gain; Pound Declines on U.K. Rating Concern

November 10, 2009

By Patrick Rial and Shiyin Chen Nov. 10 (Bloomberg) — Asian stocks rose for a third day as Chinese car sales jumped and exports improved in Taiwan and the Philippines. The pound fell after Fitch Ratings said the U.K. was the most at risk of losing its AAA rating. The MSCI Asia Pacific Index gained 0.5 percent to 118.17 as of 3:32 p.m. in Tokyo, paring a climb of as much as 1.2 percent. China’s Shanghai Composite Index advanced for an eighth consecutive day. Oil retreated as concern abated Tropical Storm Ida will cause damage to Gulf of Mexico production facilities. Hyundai Motor Co., South Korea’s biggest automaker, added 2.4 percent after a report showed a 76 percent gain in China passenger vehicle sales in October. Taiwan’s Compal Electronics Inc. , the world’s largest laptop computer maker, climbed 2.2 percent after its sales rose 61 percent last month. Taiwan and the Philippines posted the smallest export declines in at least 10 months. Japan’s current-account surplus unexpectedly widened. “Risk appetite has come back and there’s still cash waiting to be invested,” said Manpreet Gill , Singapore-based strategist for Asia at Barclays Wealth, which has $223 billion in assets. “We’re still overweight equities as an asset class given we’re still in the first 12 months after the bottom in equities and interest rates remain low.” Willing to Take Risk The pound weakened to as low as $1.66, compared with $1.679 earlier today after David Riley , head of global sovereign ratings at Fitch, said in an e-mailed statement the U.K. is the most at risk of losing its AAA status among top-rated nations because the country needs “the largest budget adjustment.” The euro fell 0.1 percent to $1.4982, after touching $1.5020 yesterday, the highest since Oct. 26. It fell 0.2 percent to 134.62 yen. The yield on the U.S. 10-year government note was little changed at 3.49 percent, after declining for two days, ahead of a record $25 billion auction today. The Fitch “comments injected a small dose of risk aversion into the market, lifting the dollar and the yen,” Sue Trinh , senior currency strategist at RBC Capital Markets, wrote in a research note today. The Taiwan dollar climbed 0.2 percent to NT$32.33 per dollar. The Philippine peso reached the strongest level since Oct. 20, gaining 0.2 percent to 46.81, after the statistics office today said exports dropped 18.3 percent in September from a year earlier, the least in 10 months. Financial shares led regional gains after Industrial & Commercial Bank of China Ltd. , the country’s largest lender, and Commonwealth Bank of Australia were upgraded by brokerages and Japan’s Financial Services Minister Shizuka Kamei said domestic banks won’t be punished if their Tier 1 capital ratios fall briefly below 4 percent. “Maximum Impact” ICBC jumped 1.8 percent to HK$6.78 in Hong Kong, while Bank of China Ltd. advanced 1.5 percent. Credit Suisse Group AG lifted both shares to “outperform” from “neutral,” citing lower-than-expected credit costs in their latest earnings reports. Commonwealth Bank , Australia’s biggest lender, gained 0.9 percent to A$55.55 after UBS AG recommended buying the shares. An index of Japanese banks included in the Topix index rallied 1.6 percent. G-20 finance ministers pledged in St. Andrews, Scotland, on Nov. 7 to keep interest rates low and maintain record budget deficits until economic recoveries take hold. The U.S. is feeling the “maximum impact” now from the federal government’s $787 billion in fiscal stimulus, former Federal Reserve Chairman Alan Greenspan said yesterday. AMP Upgrade Australian wealth manager AMP Ltd. jumped 4.4 percent to A$6.39 after Citigroup Inc. upgraded the shares to “buy” from “hold.” Axa SA, France’s biggest insurer, and AMP may sweeten their bid for Axa Asia Pacific Holdings Ltd. to about A$12.4 billion ($11.6 billion) after a first offer was rejected, Citigroup said. Axa Asia Pacific rose 1.2 percent, buoyed by an upgrade to “neutral” from “underperform” by Credit Suisse. China yesterday reported passenger car sales of 8.19 million for the first 10 months of 2009, making the nation the leading auto market this year. Chinese home prices rose 3.9 percent in October from a year earlier, the most in 14 months, the statistics bureau said today. Hyundai Motor, which cited growth in China as one reason it posted record third-quarter profit, gained 2.4 percent to 105,000 won. Rubber futures rose as much as 1.2 percent to the highest in two weeks on speculation tire demand will increase. Japan’s Toyo Tire & Rubber Co. jumped 0.6 percent after Nomura Holdings Inc. boosted the shares to “buy” from “neutral.” ‘Worst Is Over’ Japan’s Nikkei 225 Stock Average added 0.6 percent to 9,870.73. Taiwan’s Taiex Index advanced 0.8 percent. South Korea’s Kospi Index added 0.4 percent, paring a gain of as much as 1.5 percent after Yonhap News reported the nation’s navy clashed with North Korean forces. There were no South Korean casualties, according to the news agency. Japan’s current-account surplus widened in September to 1.57 trillion yen ($17.5 billion) from a year earlier, fueled by growth in China, the Ministry of Finance said today. “The worst is over,” said Masamichi Adachi , senior economist at JPMorgan Chase & Co. in Tokyo. “Exports are on a gradual recovery path. That said, they’re still at a very low level compared to their peak.” Taiwan stocks rose for the third day after October exports fell the least in 13 months on increased demand for mobile phones, computers and other electronics from China. Compal Electronics rose to NT$41.90, the highest since November 2003. Risk Outlook ‘Good’ “Increasingly the outlook for risk is very good,” said Wai Ho Leong , a regional economist in Singapore at Barclays Plc. “Japan’s current-account surplus helps the perception of Asia’s recovery story and deepens it somewhat. The question is where you should invest in Asia, and Korea and Taiwan come off as strong cyclical recovery stories.” Gold futures for December delivery slipped 0.3 percent to $1,098.20 an ounce in late trading after climbing to an intraday record of $1,111.70 yesterday. Crude oil fell 0.7 percent to $78.85. It jumped as much as 3.6 percent yesterday as Tropical Storm Ida entered the Gulf of Mexico, disrupting more than a quarter of the area’s oil and gas production, and the dollar weakened. “Most people feel that the storm isn’t going to be that severe,” said Anthony Nunan , an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “This is the last hurrah for the hurricane season.” To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net ; Chen Shiyin ; in Singapore at schen37@bloomberg.net

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Axa, AMP $10 Billion Bid May Kick Off Resurgence in Insurance Acquisitions

November 9, 2009

By Fabio Benedetti-Valentini and Oliver Suess Nov. 10 (Bloomberg) — Axa SA’s decision to team with AMP Ltd. in a $10 billion bid to buy out its Asian unit may signal a pick-up in mergers among insurers as economies improve and bailed-out financial institutions prepare to sell assets. Axa is seeking to win support from independent board members at its Melbourne-based unit, Axa Asia Pacific Holdings Ltd. , after an unsolicited bid the French insurer made with wealth manager AMP was rejected, Axa Chief Executive Officer Henri de Castries said yesterday. Paris-based Axa will raise 2 billion euros ($3 billion) in a rights offer designed to fund the Axa Asia Pacific bid and other “potential” takeovers, the company said. The insurer plans to spend a “few hundred million euros” buying the rest of units it controls in Poland, the Czech Republic and Hungary, Chief Financial Officer Denis Duverne said on a conference call. “It’s a good time to set off again on the offensive,” de Castries said on the call yesterday, speaking of acquisitions. “There will be a certain number of opportunities.” Assicurazioni Generali SpA , Europe’s third-biggest insurer, may take advantage of insurance assets expected to come up for sale if prices fall. “Prices are too high to be considered for a financially sustainable acquisition,” co-Chief Executive Officer Giovanni Perissinotto said yesterday. “But sooner rather than later we think insurance assets are likely to come to the market, and only at that time we will be open to opportunities.” ING, Royal Bank ING Groep NV , the largest Dutch financial-services company, plans to split off its insurance assets following a government rescue, the Amsterdam-based company said last month. Royal Bank of Scotland Group Plc is also selling insurance units after a U.K. government bailout. It’s too soon to say whether Axa would be interested in any of ING’s businesses, de Castries said, adding that the company has “no interest” in the U.K. insurance operations of Edinburgh-based Royal Bank. De Castries, 55, said the Axa Asia Pacific offer is “reasonable” and that he is ready to discuss it with the unit’s independent directors. Axa and Sydney-based AMP must win approval from the independent directors and minority shareholders to carry out the purchase, the company said. AMP bid A$5.34 in cash and stock for each share of Axa Asia Pacific, 24 percent higher than the closing price on Nov. 6. Under the proposal, Axa would sell its 54 percent stake in Axa Asia Pacific to AMP, and buy back the units outside Australia and New Zealand for A$7.7 billion ($7.1 billion). ‘Pole Position’ The deal would cost Axa about 1.1 billion euros, leaving about 900 million euros of the proceeds from the rights offer for potential purchases, Duverne said. “This move is key to keep the pole position that Axa tries to achieve in Europe and to bolster its position in Asia,” said Lutz Roehmeyer , who helps manage $17 billion at Landesbank Berlin AG. “We will see more M&A activity. Capital markets recovered after the crisis, enabling the financing of corporate takeovers.” Allianz SE , Europe’s largest insurer, is monitoring M&A developments “very carefully,” though has no “concrete plans” at the moment, Chief Financial Officer Oliver Baete said yesterday. Axa Asia Pacific shares rose 33 percent in Australia yesterday, indicating investors expect a higher bid. Chairman Rick Allert said he’s not prepared to accept an offer he considers too low. Axa rose 7 cents to 16.95 euros in Paris. The offer marks the second attempt by Axa to buy the unit in the past five years. Axa is seeking to raise the portion of earnings it generates from emerging markets to 15 percent within three to five years from less than 5 percent currently, Duverne said yesterday. Allianz got about 12 percent of its main insurance units’ operating profit from emerging countries in the first half. Growth Through Mergers Axa Asia Pacific is responsible for Axa’s life insurance and wealth management businesses in the region, and has operations in Hong Kong, China, Singapore, Indonesia, Philippines, Thailand, India, Malaysia, Australia and New Zealand, according to the company’s Web site . “Prices are now at levels where deals can be done,” Peter Eliot , a London-based analyst at MF Global Securities Ltd. said in a note to investors. Even so, “very few companies have the currency to raise cash to make the acquisitions they would like at this stage and Axa is in an enviable position,” he said. De Castries’s predecessor, Claude Bebear , turned Axa from a small Normandy-based company into Europe’s No. 2 insurer by market value through takeovers, including the merger with France’s Union des Assurances de Paris in 1997. Under de Castries, Axa bought Credit Suisse Group AG’s Winterthur unit for 7.9 billion euros in 2006 to gain a leading position in the Swiss insurance market and an additional 13 million clients in 17 countries from Spain to China. To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net .

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Emerging Market Corporate Bonds Better Bet Than Sovereigns, Ashmore Says

November 6, 2009

By Katrina Nicholas Nov. 5 (Bloomberg) — Emerging market corporate bonds are a better investment heading into 2010 than emerging market sovereign debt, because yields and company default rates remain attractive, according to Ashmore Investment Management Ltd. “We see emerging market corporates as a very positive source of reasonable returns because default rates are lower than in developed market corporates,” Barry Field , head of Asia for London-based Ashmore, said in a phone interview from Singapore. “Firstly these companies have less leverage, and secondly their businesses are often based around key parts of the economy like infrastructure and energy, which means they’re less vulnerable to downturns.” Of the 84 companies Standard & Poor’s has on negative credit watch, 33 are in the U.S., 9 are in Eastern Europe, the Middle East or Africa, and 8 are in Asia Pacific. S&P said Oct. 26 that the U.S. “continues to lead the pack with the lion’s share of potentially deteriorating entities.” The International Monetary Fund said Oct. 29 that Asia is rebounding and growth will probably accelerate to 5.8 percent in 2010 from 2.8 percent this year, as governments in the region pump more than $950 billion into their economies to stimulate expansion. Pension Allocations “Thirty-five percent of the world’s GDP is in emerging market countries and IMF projections show emerging market economies will be 50 percent of GDP in less than 10 years,” said Field. “If you ask the average pension fund in the U.S. what their emerging market allocation is, it’s probably five to 10 percent, but it’ll be 30, 40, 50 percent in 10 years.” While yield spreads over similar-maturity U.S. Treasuries have fallen for emerging market corporate bonds, Field said that benchmarked against other investments, they still represent an attractive return. He added that “high-beta emerging market sovereigns,” such as the Philippines and Indonesia, are worthy investments too. Beta typically refers to volatility. Spreads for Asian investment-grade corporate dollar bonds have narrowed to 2.97 percentage points from a high of 7.62 percentage points on Dec. 5, while high yield spreads have narrowed to 8.94 percentage points from a high of 25.43 percentage points on Nov. 26, JPMorgan Chase & Co. indexes show. “We had a portfolio of emerging market corporate bonds that yielded more than 30 percent in January and that yield is down to 16 percent now,” he said. “But on the other hand, if I’m going to get 3 percent in a U.S. Treasury bond and double- digit returns from emerging market corporates, I’m probably going to be happy with that for the next 12 months.” Ashmore, which had $31.1 billion in assets under management as of Sept. 30 according to its Web site , has several investments in Asia including a 91 percent stake in Petron Corp. , the Philippines’ largest oil refiner, and a controlling stake in Bangkok’s Skytrain . To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

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King, Trichet Signal Emergency Policies Nearing End as Economies Improve

November 5, 2009

By Brian Swint Nov. 5 (Bloomberg) — Europe’s biggest central banks signaled they may be reaching an end to emergency policies set up during the financial crisis as the global economy recovers. Governor Mervyn King’s Bank of England increased its bond- purchase program by the lowest amount in three extensions. European Central Bank President Jean-Claude Trichet said “extraordinary” measures to provide banks with funds will be phased out “in a timely and gradual fashion.” Today’s decisions mark the first shift toward central banks reining in support for Europe’s largest economies after Australia and the Philippines started raising interest rates. The U.S., Germany, France and Japan have returned to growth after the worst global economic slump since World War II. “Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said at a press conference in Frankfurt. “A number of indicators of spending and confidence” suggest “that a pickup in economic activity may soon be evident,” the Bank of England said in a statement in London. The euro, shared by 16 countries, rose as much as 0.6 percent against the dollar after the ECB’s decision to leave the benchmark interest rate at 1 percent. Council member Axel Weber said last week commercial banks need to prepare for a “gradual withdrawal” of the ECB’s liquidity, and signaled its 12-month loans in December may be the last. Fragile Economies The pound rose as much as 0.8 percent on the U.K. central bank’s decision to increase asset purchase by 25 billion pounds ($41.5 billion), less than the 50 billion-pound median estimate of 38 economists in a Bloomberg News survey. While the U.K. economy contracted 0.4 percent in the third quarter, reports have shown that service industries and house prices are recovering, and manufacturing output jumped 1.7 percent in September, the statistics office said today. Both the ECB and the U.K. central bank said that their economies are still fragile. “The prospect is for a slow recovery in the level of economic activity, so that a substantial margin of under- utilized resources persists,” the Bank of England said in a statement. “That will continue to bear down on inflation for some time to come.” Trichet said that “concerns remain relating to a stronger or more protracted negative feedback loop between the real economy and the financial sector.” To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

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Philippines Warns of Flooding, Landslides as Typhoon Bears Down on Luzon

October 28, 2009

By Aaron Sheldrick Oct. 29 (Bloomberg) — Philippines authorities warned of flooding and landslides as Typhoon Mirinae strengthened over the Pacific and bore down on the main island of Luzon, where more than 900 people were killed in two cyclones in the past month. Mirinae’s winds increased to 160 kilometers (99 miles) per hour from 136 kph yesterday as it headed west toward Luzon, the U.S. National Weather Service said on its Web site . The storm was centered 1,150 kilometers east of the city of Casiguran on Luzon at 5 a.m. local time. The storm is forecast to hit the coast at 4 a.m. on Oct. 31 near Casiguran. Luzon, the Philippines most populous island, is reeling from two cyclones that killed at least 929 people since Sept. 26. Typhoon Lupit also approached Luzon last week before turning away. The Philippines weather agency raised its Storm Warning Signal No. 1, meaning winds of between 30 and 60 kph are expected for areas of eastern Luzon. Residents of low-lying and mountainous areas should take precautions to avoid flash floods and landslides, the agency said. Mirinae’s winds are forecast to increase to 184 kph by 4 a.m. tomorrow, the U.S. weather service said. Typhoon Mirinae presents a “special challenge” because it may be crossing Luzon during All Saint’s Day on Nov. 1 when Filipinos usually visit cemeteries to remember their ancestors, Defense Secretary Gilbert Teodoro told reporters yesterday. Teodoro urged Luzon residents to avoid going out should warnings be issued. Police were ordered to set aside road lanes for disaster response teams, he said. The government was criticized for its slow response after Tropical Storm Ketsana blew across Luzon late last month. Ketsana was followed by Typhoon Parma, which crossed Luzon three times in early October. More than 117,000 people remain in evacuation centers after the storms that caused about 38 billion pesos ($803 million) in damage, the country’s National Disaster Coordinating Council said yesterday. To contact the reporter on this story: Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net .

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Global Rice Market `On Thin Ice’ as Prices Set to Surge in 2010, Yap Says

October 28, 2009

By Luzi Ann Javier Oct. 28 (Bloomberg) — Rice prices may return to record levels as bad weather curbs output in major growers including India, a Philippine minister and the U.S. Rice Producers Association said. “We are not very far from another rerun of 2008 prices,” Arthur Yap , the Philippines’ Agriculture Secretary, said at a conference in Cebu, central Philippines today. Higher oil prices may push up fertilizer costs, boosting prices further, he said. Food price protests swept the globe from Bangladesh to Haiti last year after fears of supply shortages prompted producers including India and Vietnam to cut exports. Rice futures surged to a record $25.07 per 100 pounds in April 2008 as shipments slowed and the Philippines, the biggest buyer, increased purchases to secure supplies and cool inflation. “Circumstances present that possibility” of rice prices returning to record levels, Dwight Roberts , president of the U.S. Rice Producers Association, said in an interview in Cebu yesterday. “We’re on thin ice.” Spot rice prices in the U.S., the fourth-largest exporter, may surge to $16 per 100 pounds early next year from more than $12 now, as cool, wet weather reduces output there and drought and storms limit supplies from Latin America, India and the Philippines, Roberts said. U.S. output may miss a Department of Agriculture estimate by as much as 15 percent and help push spot and futures prices even higher, through last year’s records, he added. Demand High Global demand for milled rice in the marketing year through 2010 will jump to the highest level since at least 1960 and exceed output by 2.4 million metric tons, the USDA said Oct. 9. That forecast assumes a 2.7 percent decline in global output to 433.6 million tons and an 8.3 percent gain in U.S. output from a year earlier to 7.056 million tons. Rough rice for January delivery rose as much as 1.3 percent to $13.945 per 100 pounds in electronic trading on the Chicago Board of Trade. The contract traded at $13.855 at 10:36 a.m. in Singapore and has gained 9.8 percent the past six months. The risk of rice prices returning to record levels requires governments to support his call for a global food reserve to ensure supplies, Yap said. “In 2008 when prices shot up, when fertilizer prices moved up, when export bans were imposed, a free liberalized international trading order was not able to do anything for the world, especially the world’s poor and hungry,” he said. Transparency Lacking Futures and spot prices have yet to reflect the global supply and demand situation because of a lack of transparency in some of the government data that traders rely on, the U.S. Producers Association’s Roberts said. “Sooner or later when there’s a big purchase, and stocks are low, then reality hits,” he said. “And that’s not just in the United States.” The Philippines is bringing forward rice imports for 2010 after losses in the domestic crop from cyclones the past month, National Food Authority administrator Jessup Navarro said yesterday. Drought in South America has also reduced irrigation, forcing some producers to cut acreage this planting season and curbing exports, Roberts said. Declining output in India, the second-biggest producer, may also turn the South Asian nation into an importer, triggering a surge in global prices, he added. “I think India is a real wild card in the next few months, or the next few weeks,” Roberts said. Still, India has no plans to import rice because its reserves are adequate, Nanda Kumar , the country’s farm secretary, said in New Delhi yesterday. To contact the reporter on this story: Luzi Ann Javier in Cebu at ljavier@bloomberg.net

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Deal-Breaker for Copenhagen Climate-Change Treaty May Be Obama’s Congress

October 27, 2009

By Alex Morales and Kim Chipman Oct. 27 (Bloomberg) — When Barack Obama was elected president, he was heralded as a possible savior for climate- treaty talks that had dragged on for years while George W. Bush rejected limits on U.S. greenhouse-gas emissions. “America is back” at the United Nations negotiating table, Democratic Senator John Kerry declared after the November election. Danish climate minister Connie Hedegaard said U.S. emissions policy moved forward 35 years overnight. Instead, Obama may send empty-handed envoys in December to the table in Copenhagen where 192 countries will try to assign emissions reductions because Congress has given him no mandate. With the 27-nation European Union, Japan and Australia ready to pledge cuts of more than 20 percent only if other nations follow suit , the stage is set for promises to collapse. “How can we expect other major players to move their position until they know that in the end the U.S. is also going to deliver?” Hedegaard , chairwoman of the UN talks running from Dec. 7-18, said in an interview. The possible domino effect, along with a continuing split between the U.S. and China, erode chances for a strong treaty, negotiators and political scientists say. “It is unlikely that an agreement which would be meaningful is going to be finalized” in the Danish capital, Robert Stavins , director of the Harvard Environmental Economics Program in Cambridge, Massachusetts, said in an interview. Hour From Copenhagen When Obama picks up his Nobel Peace Prize in Oslo in December, he’ll be an hour’s flight from where more than 10,000 envoys, UN officials and lobbyists will be meeting to conclude an agreement on slowing climate change, a challenge the president has said the U.S. will “lead the world” in tackling. Obama hasn’t decided whether to make an appearance, administration officials said. Carol Browner , the White House coordinator of energy and climate policy, said the administration hasn’t given up on getting a bill through the Senate this year, and can point to actions aimed at cutting greenhouse gases, such as proposed tailpipe emissions standards and investments in clean energy. “We feel very, very confident that we can work with the rest of the world to take significant steps forward in Copenhagen,” Browner said in an interview yesterday. Environmentalists say Obama is a likely no-show because stalled climate bills in Congress mean the U.S. may have little to offer, threatening to unravel prospects for a global deal. Getting Ready “If this were a play getting ready to come to Broadway, we would say: ‘Well, we aren’t sure of the financial backing or the orchestra and, guess what, the lead star says he might not sing,’” said Peter Goldmark , director of the climate and air program at New York-based Environmental Defense Fund. There are other stumbling blocks beyond the U.S. Industrialized nations are still split with developing countries such as China, the largest greenhouse-gas producer, over transferring clean-energy technologies to poorer nations and climate-adaptation aid. Yet the heart of a climate deal is to get nations to slash heat-trapping gases such as carbon dioxide that scientists blame for global warming. That was the UN’s principal conclusion in a 2007 declaration made in Bali, Indonesia , that proposed a “road map” for forging a new treaty in Copenhagen two years later. “If the United States comes out with an ambitious target, they’ll inspire others to do the same,” said Sweden’s chief climate negotiator, Anders Turesson , who speaks for the EU because his country holds the bloc’s rotating presidency. 1990 Levels Obama has said he’ll push to cut U.S. emissions back to 1990 levels by 2020. The U.S. House passed legislation in June to create a cap-and-trade system that would limit gas emissions and create a market in pollution permits. Today, Senate committee hearings are set to begin in Washington on a comparable measure. Congressional leaders, embroiled for months in the debate over health-care legislation, made no promises that the full Senate will take up the climate bill before 2010. The moderate Democrats and Republicans “we are counting on” to back climate-change legislation are preoccupied with overhauling the U.S. health-care system, said Bob Simon, chief of staff of the Senate Energy Committee. Having no congressional mandate will make it “extraordinarily difficult” to commit to a target in treaty talks, U.S. lead negotiator Jonathan Pershing said Oct. 9 at the last negotiating round in Bangkok. Firm Commitments If the U.S., the second-largest emitter, could deliver, other countries might firm up their commitments, Brice Lalonde , France’s lead negotiator, said in a telephone interview. He pointed to carbon-reduction pledges by many developed nations that are conditional on a deal being reached in Denmark. “Look at all the commitments which are conditioned by ‘if,’” Lalonde said. “Take out all these ifs and we’ve got an agreement.” Only if other nations take similar steps will Japan and Australia cut their emissions 25 percent by 2020, they said. Commitments by New Zealand and Switzerland are also contingent on a wider deal. The EU has pledged a 20 percent greenhouse-gas cut by 2020 from 1990 levels and will ramp that up to 30 percent if comparable action is taken by other developed nations. Developing nations, whose emissions are growing faster than in richer countries, might be motivated to talk about when they can ‘peak’ their greenhouse gases before starting to cut them if they got a clear stance from the U.S., Lalonde said. Industrial Competitors The U.S. climate position avoids giving too much economic leeway to China, a growing industrial competitor that rejects binding emissions targets. China says that as a developing nation the priority is to pull its people out of poverty. The two nations release 40 percent of global emissions. Even so, China President Hu Jintao has said that his country will cut emissions in proportion to economic growth by a “notable” margin by 2020. “It’s fair to say that the Chinese are holding back on putting forth a number in terms of their greenhouse-gas intensity target until they have greater clarity on what the U.S. is going to do,” said Jake Schmidt , international climate policy director for the Natural Resources Defense Council, a New York-based environmental group. “If the U.S. put forward a number and gave a clear signal of what it would do, I think China would follow minutes after that.” Back Home American negotiators say they don’t want to bring a deal back home to the Senate, the only U.S. body that can ratify a treaty, and get it rejected. Former President Bill Clinton’s UN envoy Peter Burleigh signed the Kyoto Protocol accord in 1998. Neither Bush nor Clinton sent the treaty to the Senate. The 100- member chamber said at the time it would reject an accord that didn’t make requirements of developing nations such as China. “We don’t want to repeat the Kyoto experience of having a number where there’s nothing behind it,” Obama’s climate envoy, Todd Stern , said Oct. 18 in London. By avoiding Kyoto, the world’s biggest energy consumer was allowed to increase emissions by about 16 percent from 1990 through 2007, UN data show. Kyoto demanded a 7 percent reduction from the same base year to the 2008-2012 measurement period. Hostage to Congress “Are we going to be forever hostage to the U.S. Congress?” asked Bernarditas Muller , a negotiator for the Philippines who helps co-ordinate the G77 group, an alliance of 130 developing nations. Just as in the 1990s, Congress is concerned over losing jobs to low-cost economies with no emission rules and members are considering setting duties to be paid on their imports. “The negotiations need to move forward on what we do with leveling the playing field on manufacturing so that a country that acts responsibly on CO2 emissions doesn’t lose jobs to those countries that don’t,” said Senator Sherrod Brown , a Democrat from Ohio. Obama and many world leaders probably will send underlings to the Danish capital instead of traveling themselves as the chance of countries breaking a deadlocks are slim, said Eileen Claussen , head of the Pew Center on Global Climate Change in Arlington, Virginia. “There is a lot of pressure on the president to go,” Claussen said. “But it’s hard to imagine heads of state going to Copenhagen and ending up with a political declaration that says: ‘It’s really hard and we are going to take another six months to do it.’” Long-Term Targets The U.S. has signed up to some long-term targets, including a commitment by the G8 that developed nations should cut emissions by 80 percent by 2050. In July, the Major Economies Forum, which groups the biggest polluters including the EU, U.S., China and 14 other nations, said they’ll aim to contain average warming since industrialization in the 1800s to 2 degrees Celsius (3.6 degrees Fahrenheit). Signing up to such targets means countries need to devise “pathways” on how to get there with targets in the nearer term, according to France’s Lalonde. “It’s easy to say something for 2050 but what’s more important for us is to show how you get there,” Lalonde said, adding that the U.S., which is lagging behind for now in the fight against global warming, has a “treasury of ingenuity” that can help it catch up. “If they’ve been on the moon, they can reduce greenhouse gases,” he said. To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net . Kim Chipman in Washington at kchipman@bloomberg.net

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China Moves to Project Air Power in Pacific With Soviet Carrier Overhaul

October 20, 2009

By Bloomberg News Oct. 20 (Bloomberg) — Welding torches flare at dusk in the coastal Chinese city of Dalian as workers mill about on the flight deck of an unfinished aircraft carrier once intended for the Soviet navy. More than 400 miles (643 kilometers) from the ocean, a full-size mock-up sits next to a lake in Wuhan. While the twin can be used to train deck crews, it will never sail. Its “hull” is a 1,000 foot-long (300 meter) building. China’s leaders have talked for five decades about acquiring what they call “aircraft mother ships.” Spurred by dependence on safe sea lanes for exports and inbound shipments of oil , gas and iron ore, the world’s fastest-growing major economy is preparing to send a carrier to sea within a few years, military analysts say. Such a move in the Pacific, where the U.S. has dominated since World War II, would give China added power in territorial disputes with Japan, South Korea, Vietnam and the Philippines. “A Chinese aircraft carrier is probably a matter of when, not if,” says David Finkelstein , director of China studies at CNA , an Alexandria, Virginia-based consulting group with national-security expertise. “There is already a strategic rationale for the need for an aircraft carrier or some sort of vessel that can project air power within the region.” The first will be the former Varyag being completed in Dalian, according to a July report by the U.S. Office of Naval Intelligence . It predicts the warship will become operational as a training platform between 2010 and 2012, with domestically built carriers “sometime after 2015.” Destroyers, Submarines They would join a fleet of about 190 principal ships, including destroyers, submarines and amphibious vessels, according to a 2009 U.S. Defense Department report. That compares with about 285 U.S. ships , including 11 aircraft carriers displacing about one-third more than the 65,000-ton ex- Varyag. China must buy jets, train aviators, build support vessels and learn the skills required to conduct air operations at sea. One such battle group costs about $10 billion, U.S. Naval War College researchers estimate. While China’s commission of an aircraft carrier may cause consternation in Washington, it won’t change the military balance between the two nations because of the U.S. lead in numbers of carrier battle groups and platforms such as ultra- silent cruise-missile-carrying nuclear submarines, says Robert Ross , a professor at Boston College in Massachusetts who specializes in U.S.-China relations. Military Installations That reality may be lost amid alarm in the U.S. Congress and among allies including the Philippines, which came to the brink of conflict with China in 1995 over alleged Chinese military installations on a South China Sea reef and will look for reassurance from the U.S. that defense ties remain strong. “The carrier is a symbol of power projection, which will simply resonate in other countries as it resonates in China,” Ross says. China concentrated on protecting its home waters with missiles, submarines and minelayers until this decade; carriers weren’t seen as necessary or cost-effective, Ross says. It bought a World War II-era vessel from Australia in 1985 that it later scrapped, according to the Australian Navy . Two Russian carriers became tourist attractions . China’s fleet has begun to range beyond its coast. Two destroyers and a supply ship deployed for anti-piracy patrols off Somalia in December 2008. With a $3.9 trillion economy and the world’s largest foreign-exchange reserves, at $2.3 trillion, China’s leadership is showing signs it is serious about joining the U.S., Russia, France and Brazil in possessing vessels capable of launching conventional fixed-wing airplanes. Offensive Operations China “won’t forever be without an aircraft carrier,” Defense Minister Liang Guanglie told his Japanese counterpart in March, Xinhua News reported . China’s 2006 Defense White Paper said the navy would extend its mandate beyond coastal defense to include “offshore defensive operations.” The Varyag was originally intended to be the second 65,000- ton carrier of the former Soviet Union when construction began in the 1980s; it wasn’t completed after the country broke up in 1991, according to the U.S. Office of Naval Intelligence July report. Its sister, the Admiral Kuznetsov, is the flagship of Russia’s navy. Ukraine inherited the Varyag, selling it to China in 1998. It arrived in 2002 in Dalian, site of China’s largest shipyard , the report said. It was in plain view during a visit last month, in drydock about 600 meters from an Ikea furniture store. Crew Training During renovation, its future crew could train in Wuhan’s southern suburbs. Construction on the mock-up began last year, heralded by drummers and the provincial Communist Party leader, according to a press release from state-owned China Shipbuilding Industry Corp. in Beijing. Two cranes towered above the structure as of last week, visible to farmers across Huangjia Lake fertilizing vegetable plots. Finkelstein and Ross say they believe China is trying to avoid surprising the world when it inaugurates its carrier program and has allowed the military to make public statements about its plans, even though two people at China Shipbuilding’s 701 Institute hung up when called about the project, and the Defense Ministry didn’t return fax and e-mail requests for comment. “This shouldn’t be a shock when it happens,” Finkelstein says. “The real question is, what are they going to do with these things?” — Michael Forsythe . With assistance from Tony Capaccio in Washington. Editors: Melinda Grenier , Bill Austin . To contact Bloomberg News staff on this story: Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net .

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Stock Rally of 503 Percent Puts OPEC to Shame: William Pesek

October 16, 2009

Commentary by William Pesek Oct. 16 (Bloomberg) — There’s only one thing to say about OPEC’s goal to be compensated for falling oil prices: Ha ha ha! Folks, you must be kidding me. The stuff has made you rich. Government coffers are flush with the spoils of pumping “black gold” out of the ground and hastening global warming. Now you want us to cushion the blow as we combat the phenomenon? It would be laughable if it weren’t an indicator of the difficulty of working together to make sure future generations can breathe. Anyone expecting big, history-making news at the United Nations Climate Change Conference in Copenhagen this December should think again. Saudi Arabia, the biggest supplier in the Organization of Petroleum Exporting Countries , is seeking to enlist other members to request compensation if environmental policies reduce demand for oil, the New York Times reports. It’s hardly the first time Saudi Arabia has pushed the idea, yet it plans to take a harder line on an issue that has moved to the forefront. Even if meetings in Copenhagen result in ambitious plans to limit greenhouse gases and keep temperatures from rising, oil production won’t take a big hit anytime soon. Nobuo Tanaka , head of the International Energy Agency, spoke for many of us this week when he asked: “Do they really need to be compensated?” No, and they shouldn’t be. It’s one thing for a government like the U.S. to use taxpayers’ money to save General Motors Corp. It’s quite another to ask the citizens of one nation to pay for the greed and complacency of producers that had decades to diversify their economies away from oil — and didn’t. Commodity Gods OPEC should be thanking the commodity gods that crude oil prices reached a one-year high yesterday. Not long ago, the talk was of another Great Depression. Now the focus is on whether oil will rise toward $100 per barrel from $75. Like any self- respecting cartel, OPEC should revel in the difficulties that families are having filling gas tanks from New York to Seoul. Governments around the world weren’t demanding compensation from OPEC in July 2008 when oil was approaching $150. Oil producers should look inward, own their plights and act accordingly. OPEC overplays its hand by supporting inflated energy prices, and everyone knows it except for its members. Sure, the cartel helped out a little in the past year by boosting production here and there. Pipeline flows slowed pretty quickly, though, once markets stabilized and OPEC may be sowing the seeds of its own demise. 82 Years On It’s disheartening to think that 82 years later, Upton Sinclair’s book “ Oil! ” still helps explain where we are. The last 12 months have been all about the excesses of capitalism, corruption, income inequality and obsession with fossil fuels that Sinclair explored in his 1927 novel. The question is whether consumers are so fed up with oil producers’ greed that they will now make more effort to find alternative-energy sources. While hard to imagine two years ago, China is working to leapfrog the Japanese and the U.S. economies by using green technologies. BYD Co. tells the story, and not just because its share price has gained 503 percent this year. The Chinese maker of the world’s first mass-produced plug-in hybrid car got the attention of Warren Buffett . Last year, BYD sold 225 million new shares to Berkshire Hathaway Inc.’s MidAmerican Energy Holdings Co. Buffett is profiting from something that isn’t obvious to everyone: There is money to be made as China, India and other key developing nations work to slow environmental degradation. Deadly storms in the Philippines and Vietnam leave little doubt that rising world temperatures can no longer be ignored. Climate Change The same goes for residents of Sydney. Recent dust storms that reddened the skies and triggered health warnings are a signal that the fallout from climate change will increasingly affect one of the Asia-Pacific region’s financial centers. We can debate the magnitude of BYD’s stock rally, which enabled founder Wang Chuanfu to jump 102 places to top the annual Hurun Rich List of China’s wealthiest people. What isn’t in dispute is the intensifying hunger to replace oil. Look no further than Detroit, where even GM is producing an electric car to compete with Toyota Motor Corp.’s Prius hybrid. Japan emerged from the 1970s oil shocks way ahead of the pack in the area of energy efficiency. It would be OPEC’s worst nightmare if this dynamic were afoot on a much larger scale at this very moment. All over the globe, scientists are working on the next generation of fuel alternatives. By engineering high prices, OPEC is merely accelerating the process. Oil at $100 a barrel will fuel the very innovation the cartel would sooner avoid. If you think oil producers should be compensated for this, that’s fine. Just keep my tax dollars out of it. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Rice Advances to Highest Since January After Storms Cut Philippines Output

October 14, 2009

By Cecilia Yap and Luzi Ann Javier Oct. 14 (Bloomberg) — Rice futures surged to the highest level since January after the Philippines, the world’s biggest importer, said it may arrange a second tender by yearend after storms cut local output, potentially boosting global demand. “If needed, we will do it,” Agriculture Secretary Arthur Yap said today, referring to the possibility of another purchase on top of the 250,000 ton tender set for Oct. 30. That order will be the nation’s earliest tender for next-year supplies, two months ahead of normal, the National Food Authority has said. Rice futures jumped to a record last year after the Philippines boosted purchases and some exporters curbed shipments amid concern that there may be a global shortage. Corn and wheat also touched all-time highs in 2008, pushing food inflation higher and sparking unrest from Haiti to Egypt. “Prices are likely to climb further on the back of strong demand from the Philippines,” Euben Paracuelles , an economist at Royal Bank of Scotland Plc, wrote in a note dated yesterday and received today. Rough rice for November delivery advanced for a third day today, gaining as much as 2.8 percent to $14.29 per 100 pounds on the Chicago Board of Trade, the highest level since Jan. 13. The futures, which touched a record $25.07 per 100 pounds in April 2008, traded at $14.18 at 6:06 p.m. in Singapore. “If we start having problems, weather problems, production problems, the price of rice is going to skyrocket over the next decade,” investor Jim Rogers, chairman of Rogers Holdings, said in an Oct. 12 interview. “When it happens, I don’t know,” he said. “Rice is a basic foodstuff for much of the world.” ‘Flexibility’ The Philippines has enough rice to last the rest of this year, Yap said today at a briefing, reiterating recent comments. The country will import “only as a last resort,” he said, without giving a figure for how much may be bought in a second tender. The Philippines “has the “flexibility to enter the market when appropriate,” Yap said. Parma, the second storm to hit the Philippines in the past two weeks and which devastated crops in the nation’s second- largest rice-producing region, was forecast to make landfall in Vietnam today, the world’s second-largest rice exporter. The Philippine Department of Agriculture yesterday boosted the estimate for losses to rice output from Parma and Ketsana, an earlier storm, to 13 percent of the 6.5 million ton fourth- quarter forecast, from 8.6 percent a day earlier. The revised figure equates to about 545,550 tons of milled rice, according to Bloomberg calculations based on average recovery rates. Planting Intentions The Southeast Asian nation will monitor developments in the global rice market and study local planting intentions before deciding to import more, Yap said. Imports for 2010 may total 2 million tons, according to the National Food Authority. The average price of well-milled rice in the Philippines has gained 4.2 percent to 35 pesos (75 cents) per kilogram as of Oct. 13, compared with the last week of September, according to the Bureau of Agricultural Statistics. “Given that initial assessments of the impact of the damage tend to be understated, and that the risk of more typhoons cannot be ruled out, next year’s import requirements could approach 2008 levels,” RBS’s Paracuelles said. The Philippines imported 2.3 million tons in 2008. To contact the reporters on this story: Cecilia Yap in Manila at cyap19@bloomberg.net ; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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US troops help Philippines as storm toll tops 600

October 11, 2009

US troops help Philippines as storm toll tops 600

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