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Stocks, Dollar Advance, Treasuries Decline After U.S. GDP Beats Forecasts

January 29, 2010

By Nikolaj Gammeltoft and Rita Nazareth Jan. 29 (Bloomberg) — Stocks rebounded and the dollar strengthened, while Treasuries fell, after the U.S. economy grew at the fastest pace in six years and companies from Amazon.com Inc. to Chevron Corp. posted higher-than-estimated results. The Standard & Poor’s 500 Index climbed 1 percent to 1,094.98 at 10:23 a.m. after slumping to an almost three-month low yesterday. Europe’s Dow Jones Stoxx 600 Index extended its rally to 1.4 percent after the U.S. data. The Dollar Index , which gauges the currency against six major U.S. trading partners, climbed to the highest since August. The yield on the 10-year Treasury note rose 4 basis points to 3.68 percent. The U.S. Commerce Department reported that gross domestic product grew at a 5.7 percent annual pace last quarter, higher than the median economist estimate in a Bloomberg survey. Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data following a record nine-quarter earnings slump. “The economy is gaining traction,” said Thomas Nyheim , a money manager at Christiana Bank & Trust Co. in Greeneville, Delaware, which manages $4.7 billion. “We’ve got both GDP and corporate earnings beating expectations. The global scenario looks better, at least for today.” U.S. equities extended gains after the Reuters/University of Michigan index of consumer confidence and the Institute for Supply Management-Chicago Inc.’s business barometer both topped economist estimates. Asia Slips The MSCI Asia Pacific Index dropped 1.6 percent. Asian markets closed before the release of the U.S. GDP data. AU Optronics Corp., Taiwan’s largest maker of liquid-crystal displays, fell 5.7 percent in Taipei after posting an unexpected fourth-quarter loss. Advantest Corp., the world’s biggest maker of memory-chip testers, declined 10 percent in Tokyo after forecasting a wider-than-estimated full-year loss. In Europe, Bayerische Motoren Werke AG, the world’s largest luxury carmaker, rallied 3.9 percent after forecasting a profit this year and rising sales in the U.S., China and Germany. The S&P 500 trimmed its third straight weekly drop. Revenue growth hasn’t been fast enough to extend the S&P’s 500’s 60 percent rally since March. While profits since Jan. 11 beat analysts’ estimates by 12 percent, sales have exceeded forecasts by 1.4 percent, according to data compiled by Bloomberg. The benchmark gauge for U.S. equities has fallen 2.3 percent so far this year as U.S. President Barack Obama called for limits on risk-taking by banks and China moved to restrict lending to cool growth. Amazon.com, Chevron Amazon.com Inc. advanced 3.5 percent after saying quarterly sales may accelerate. Chevron, the second largest U.S. energy company, added as much as 1 percent. The yen dropped against all 16 major currencies, losing at least 1.2 percent against the Mexican peso, Brazilian real and South African rand. Greek 10-year bonds snapped three days of declines after European Union Monetary Affairs Commissioner Joaquin Almunia said in Davos, Switzerland, that the Mediterranean country will not default. The yield dropped 21 basis points to 6.95 percent, narrowing the premium investors demand to hold the debt instead of German bunds by 22 basis points to 374 basis points. The Bombay Stock Exchange Sensitive Index added 0.3 percent after the Reserve Bank of India raised its economic growth forecast while keeping benchmark interest rates unchanged. The MSCI Emerging Markets Index fell 0.4 percent, led by declines in liquid-crystal-display makers after AU Optronics Corp. posted an unexpected loss. Developing-nation equity funds lost $608.5 million in the week ended Jan. 27, the first net outflows in 12 weeks, on concern that China will raise interest rates to combat inflation, EPFR Global said. Copper fell 0.2 percent to $6,880 a metric ton in London, retreating for a fourth day, its longest losing streak since December. Gold for immediate delivery dropped 0.5 percent to $1,081.88 an ounce, also a fourth decline. Crude oil rose 0.9 percent to $74.33 a barrel in New York trading. To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Video: Weinberg Sees No Resurgence of Confidence in M&A Market: Video

January 29, 2010

Jan. 29 (Bloomberg) — Peter Weinberg, founding partner of Perella Weinberg Partners LP, talks with Bloomberg’s Erik Schatzker about the outlook for mergers and acquisitions. Weinberg, speaking from the World Economic Forum in Davos, Switzerland, also discusses public sentiment toward the banking industry and “conservatism” in the M&A market. (Source: Bloomberg)

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Video: Low Taxes, Lack of U.S. Crackdowns Add to Zug’s Appeal: Video

January 29, 2010

Jan. 29 (Bloomberg) — Bloomberg’s Erik Schatzker reports on Zug, Switzerland, a growing center for commodities markets. (Source: Bloomberg)

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Video: Thiam Says Prudential Will `Absolutely’ Expand in Asia: Video

January 29, 2010

Jan. 29 (Bloomberg) — Tidjane Thiam, chief executive officer of Prudential Plc, talks with Bloomberg’s Francine Lacqua about the company’s expansion plans for Asia. Thiam speaks at the World Economic Forum in Davos, Switzerland. (Source: Bloomberg)

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Credit Agricole Chief Pauget Sees No Capital Shortage From New Basel Rules

January 29, 2010

By Fabio Benedetti-Valentini Jan. 29 (Bloomberg) — Credit Agricole SA Chief Executive Officer Georges Pauget said proposed capital rules won’t cause a shortage of reserves at the bank, after analysts estimated its capital may fall to zero under the new regulations. “The analysts have not all the elements in their hands,” Pauget said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland, yesterday. The bank, France’s largest by branches, has “no major issue” related to its capital position, he said. Pauget is seeking to defuse concern about the potential impact of proposed capital standards on Credit Agricole that has helped push the stock down 16 percent in Paris trading since Dec. 16, the day before the Basel Committee on Banking Supervision said lenders must increase the quality of reserves they hold by the end of 2012. The Bloomberg index of European banks fell 8.8 percent in the period. Because of the way Credit Agricole allocates funds, its core capital ratio, a measure of financial strength, would fall to between 1.2 percent and minus 3 percent under the Basel rules proposed in December, according to the estimates of eight analysts surveyed by Bloomberg News. The Paris-based bank may need to raise capital or sell assets under the Basel proposals designed to bolster banks’ finances, analysts said. “Any of these scenarios would be like a nightmare for the group, if an exception isn’t negotiated,” said Renaud Mascarin , who helps manage about $125 billion at Groupama Asset Management in Paris and doesn’t hold Credit Agricole stock. ‘Biggest Loser’ The Basel committee’s 27 banking supervisors made the suggestions to redefine the capital banks must hold to absorb losses. The proposals, to be completed by the end of this year, will define which assets will count toward the regulatory minimum capital banks must hold from the end of 2012. “We project Credit Agricole to be the biggest loser, not just in France but in the sector, with core capital turning negative,” Nomura International Plc analysts, including London- based Jon Peace , wrote in a Jan. 8 note to investors. “Ultimately we believe that some compromise will be found in terms of regulatory forbearance or group restructuring, although a capital increase cannot be ruled out,” Peace said. Credit Agricole, listed since 2001, is controlled by a group of 39 customer-owned regional banks. Its assets include the corporate and investment bank, the insurance business, the LCL retail bank in France and consumer-banking networks in countries such as Italy and Greece. The publicly traded unit also has a 25 percent stake in the regional banks. Seeking a Solution Under the current Basel rules, Credit Agricole deducts from its Tier 1 capital ratio 50 percent of its stake in the group’s regional banks, and the new Basel rules might imply a 100 percent deduction, analysts said. The stakes in regional banks were valued at 12.2 billion euros at the end of 2008, according to the company’s annual report . “The Basel committee has looked at the very big picture, but with a bottom-up analysis you don’t get the same results,” said Pierre Flabbee , a Paris-based analyst at Kepler Capital Markets. “It would be useful to consider Credit Agricole and the regional banks as one group” when defining new capital rules, he said. Standard & Poor’s and Fitch Ratings rate Credit Agricole’s finances with the regional banks included. Pauget, 62, said in the Davos interview that the bank has found “jointly with the monetary authority the way to solve some specific issues related to the French cooperative banks.” Pauget is stepping down as CEO by March 1. Stock ‘Capped’ Credit Agricole’s capital woes are not limited to the stakes in regional lenders. The company also may have to review the way it allocates capital to its insurance business and holdings in banks such as Italy’s Intesa Sanpaolo SpA and Spain’s Bankinter SA, analysts said. Total deductions may reach about 30 billion euros “at worst,” according to analysts. “The stock is temporarily capped and probably it will remain so as long as there is uncertainty over regulation and there’s a risk of a capital increase,” said Jean Sassus , an analyst at Raymond James in Paris. Pauget’s successor, Jean-Paul Chifflet , will probably use the bank’s earnings to bolster capital through 2012, when the new Basel rules will be applied, Sassus said. The new capital rules risk pushing Credit Agricole to “put a brake on” acquisition plans to expand internationally, Sassus said. The bank had 29.1 billion euros of core Tier 1 funds at the end of September, or a ratio of 9.1 percent. Including the regional banks, the group’s Tier 1 funds were 52.9 billion euros by Sept. 30, according to the data from the company. “When you look at Credit Agricole including the regional banks, it’s well capitalized,” Groupama’s Mascarin said. “But capital isn’t located where the regulator looks for it.” To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net .

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Video: Voser Says Shell `More Pessimistic’ on First-Half Demand

January 29, 2010

Jan. 29 (Bloomberg) — Peter Voser, chief executive officer of Royal Dutch Shell Plc, talks with Bloomberg’s Francine Lacqua about the outlook for oil demand. Speaking at the World Economic Forum in Davos, Switzerland, Voser also discusses Shell’s business interests in Iran, Venezuela and Nigeria.

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Video: Papaconstantinou Says Greece May Make Deeper Budget Cuts

January 29, 2010

Jan. 29 (Bloomberg) — Greece’s Finance Minister George Papaconstantinou talks with Bloomberg’s Andrea Catherwood about the country’s fiscal situation. They speak in Davos, Switzerland, where the World Economic Forum’s annual meeting is taking place. (Source: Bloomberg)

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Bank Chiefs Plot Response to Financial Regulators in Private Davos Huddle

January 29, 2010

By Christine Harper and Aaron Kirchfeld Jan. 29 (Bloomberg) — Brian Moynihan, Oswald Gruebel and Josef Ackermann , leaders of some of the world’s biggest banks, met during the World Economic Forum in Davos, Switzerland, to plot how to reassert their influence with regulators and governments. Chief executive officers including Bank of America Corp. ’s Moynihan , UBS AG’s Gruebel and Deutsche Bank AG’s Ackerrmann convened yesterday, a week after U.S. President Barack Obama shocked financiers with plans that may force large banks to limit their size and curb investments in hedge funds and private equity. The private meeting, held down a hallway near the back entrance of the Davos conference center, aimed to prepare executives for another private gathering in Davos on Jan. 30 with top policymakers and regulators, including U.S. House Financial Services Committee Chairman Barney Frank . “We’re trying to figure out ways that we can be more engaged,” Moynihan said in an interview after he left the meeting with about 30 financial CEOs. “Because, honestly, we were not considered to be the right kind of people to talk to for the ideas on how to fix this thing.” Moynihan said that much of the discussion was about tactics, such as who the executives should approach and when. He said the bankers were concerned that too much regulation could hamper economic growth and that conflicting national approaches need to be avoided. ‘In Consensus’ “It was a positive meeting, we’re in consensus,” Gruebel said during a break in the three-hour session, declining to provide further details. “Global banks would like to have a level playing field, but regulators have a national view and politicians too.” The attendees included Credit Suisse Group AG CEO Brady Dougan , Barclays Plc President Robert Diamond and HSBC Holdings Plc Chairman Stephen Green . Leaders of many industries hold private meetings at the World Economic Forum every year. Nobel laureate Joseph Stiglitz , the Columbia University economist who was also in Davos, said bankers welcome the focus on a global accord on regulation. “The bankers are loving this because they know we will never get an agreement and we’ll never get regulation and we’ll go back to where we were,” he said. Kravis, Bernstein, Loeb In a separate private gathering next door, Congressman Frank spoke to about 50 investors, including KKR & Co. co- founder Henry Kravis , Carlyle Group Managing Director David M. Rubenstein and Third Point LLC CEO Daniel Loeb . “The purpose of the meeting was to have a good sense of how do you develop good regulation at a time when there’s so much friction in the market,” said Jack Ehnes , CEO of the California State Teachers’ Retirement System, the second-biggest U.S. public pension fund, who attended the meeting. Frank, wearing snow boots and an untucked shirt under his pinstriped suit, said after the session that he was going to “crack down” on hedge funds. He didn’t elaborate. French Finance Minister Christine Lagarde said in Davos that there should be a “dialogue” between governments and banks on the technicalities and principals of regulation. “That’s the only way we’re going to get out of it,” she said. Two participants at the bank CEO meeting said that Obama’s proposals didn’t dominate the discussion. ‘Pay, Pay, Pay’ “It’s a little hard to figure out exactly what the words mean, and that will be shaped over time,” Bank of America’s Moynihan said. He said Bank of America and some other banks have a “minimum” amount of profit and revenue derived from so- called proprietary trading and investments. Executives interviewed after the meetings said they understand that new rules are inevitable and urged national regulators to coordinate through the Group of 20 or other international bodies. Some executives said they think the biggest challenge for the industry is overcoming public anger about bonuses and compensation. “When you talk to politicians, the big issue is pay, pay, pay,” UBS’s Gruebel said. Even though the industry has taken steps to reform its pay practices, the public isn’t satisfied, he said. “You can’t say to anyone who’s lost his job that we used to pay someone 10 million and now we’re paying 1 million,” Gruebel said. To contact the reporter on this story: Christine Harper in Davos at charper@bloomberg.net ; To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Video: Levy Says Publicis Benefiting From Digital Investments

January 29, 2010

Jan. 29 (Bloomberg) — Maurice Levy, chief executive officer of Publicis Groupe SA, talks with Bloomberg’s Francine Lacqua about the growth of the company’s digital business. Speaking at the World Economic Forum’s annual meeting in Davos, Switzerland, Levy also assesses the outlook for individual industry groups.

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UBS Man Drops Bonus, Escapes Trading Floor for Luxury Ski-Maker Near Davos

January 28, 2010

By Joseph Heaven and Matthias Wabl Jan. 29 (Bloomberg) — UBS AG senior currency strategist Benedikt Germanier decided that he had become just another battery hen on a trading floor where money was everything that counted. So he ditched his bonus and banker life in the U.S. for a pair of handmade skis. “I feel much more down to earth, and I have my destiny in my hands,” says Germanier, 43, sitting in his office in Disentis , an Alpine village 44 miles from Davos where global executives are meeting this week. He is now chief executive of Zai AG and its 10 staff, including carpenters and craftsmen. Germanier says he halved his pay, without giving figures. He also gave up his $7,000-a- month, 250-square meter house with gardener, located 15 minutes from UBS’s Stamford, Connecticut trading floor, which is the size of two football fields. Banks and brokerages worldwide have announced plans to shed about 329,000 jobs, or 5.9 percent of the total, since the beginning of the credit crisis, according to Bloomberg data. Some bankers are now trading for their own account, with private equity firms or boutique investment advisers. Others, such as Germanier, voluntarily left for work outside finance. “To move ahead you need to push yourself out of your comfort zone, and that’s very important,” he says. “It’s not very comfortable” to give up the regular large pay-checks, says Germanier, a 1.87-meter (6-ft-1-inch) sports lover. Germanier, whose dark hair is cropped short, is sitting on a low wood-and-felt bench in his office, wearing Levi’s jeans, a blue V-neck pullover and North Face trekking boots. He used to favor suits and 180-pound ($291) Jeffrey-West shoes. London, New York Germanier’s previous jobs with Switzerland’s biggest banks shuttled him between Zurich, London and New York. He’s still getting up at 5:30 a.m. for a two-and-a-half hour train commute twice a week. His new office, cluttered with skis, maps and photographs, is next to a workshop measuring 500 square meters (5,382 square feet). In the U.S., money was the driver, says Germanier, who grew up in Zurich as the son of a manager in a cement company. “Sometimes I even thought they would sell their grandmother for a trade,” he says, talking about East Coast bankers, and he realized that he had become one of these “hens” on a trading floor, reminding him of a battery farm. Now he’s selling skis built using 50 million-year-old granite as well as high-tech materials. The cheapest cost 3,300 Swiss francs ($3,150) — about four times as much as the high- street average — and the most expensive sell for 9,800. Moving Markets Germanier graduated in Economics from Zurich University aged 28 with the equivalent of a Master’s Degree. His research on global capital flows eventually landed him a job at UBS, making the bank money when Germanier predicted the dollar would fall versus the Swiss franc. “It’s a great feeling of power to make a call and move the market,” he says. His network in Swiss banking still includes central bank President Philipp Hildebrand and Walter Berchtold , today the head of private banking at Credit Suisse Group AG. He misses presentations to senior executives at the U.S. Department of the Treasury, the European Central Bank or the Swiss National Bank, Germanier says. As the S&P 500 Index fell through a 12-year low in February 2009, Germanier went on a two-week ski trip to the southeastern region of Switzerland. At a time when colleagues left banks in droves, he met with Simon Jacomet, a ski- instructor who he’d befriended in the 1990s. Business Appeal Jacomet founded Zai in 2003 in search of the perfect ski. Zai means “tough” in the local Romansch language and the company hasn’t turned a profit since its founding. Jacomet asked Germanier to help him improve the business. “I didn’t even think. It came out of my stomach so strongly,” Germanier says. “Sometimes you know you have to do this.” Germanier’s office has windows looking across the empty valley and back to the 2,300-population Disentis and its monastery. Zai sold about 800 skis last season and had 2.5 million francs in revenue. Germanier says there’s a market potential to more than double sales to 2,000 a year. Zai offers to tailor the properties and camber of the skis to individual tastes. They have as many as 18 layers of walnut and cedar wood, woven polymers, India-rubber and gneiss stone from near St. Moritz. The skis are bought by instructors, businessmen, lawyers and farmers’ wives, Germanier says. Large Wallet “You can’t say that the ski is three times as good only because it’s three times as expensive as a normal one,” says Marco Meier, of the Och Sport shop on Zurich’s Bahnhofstrasse. “You also pay for the design and the fact that they are handmade.” Meier, who has tested Zais in the past, says the skis are mostly bought by “rather good skiers with a large wallet,” and he describes the skis as part of the “top-notch category” and “very comfortable and smooth.” The quiet of the village doesn’t prevent Germanier from following the markets on his iPhone, and he still trades on his own account. Instead of expensive meals with clients, he’s having his loyalty card stamped after a 16.80-franc lunch in the buffet restaurant by the train station. “Can I afford this job?” he says. “I wasn’t actually sure, but showing my kids and myself to be free and to do things independently was worth much more than double my salary.” To contact the reporter on this story: Joseph Heaven in Zurich at jheaven1@bloomberg.net ; Matthias Wabl in Zurich at mwabl@bloomberg.net

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Greece Bond Yields Show Waning Investor Faith EU Nation Will Avoid Bailout

January 28, 2010

By Matthew Brown and Keith Jenkins Jan. 29 (Bloomberg) — Greece bonds and credit-default swaps show investors are starting to doubt that the nation can reduce the largest budget deficit in the European Union without help from outside. The nation’s government bonds are the world’s worst performers in January, losing 4.19 percent in local currency terms and extending their decline over the past three months to 10 percent, Bloomberg/EFFAS indexes show. Credit-default swaps tied to Greece trade at about the same levels as Dubai when it got a $10 billion bailout from Abu Dhabi in December. “There’s a lot of self-fulfilling prophecy, because if you follow the market and sell Greece off then the probability that external help is needed will rise,” said Christoph Kind , the Frankfurt-based head of asset allocation at Frankfurt Trust, which manages about $20 billion. “We will have to see an official statement from EU officials or the European Central Bank on how they can show their support for Greece.” The German and French governments denied a report yesterday in the newspaper Le Monde that European Union member states are examining ways to provide assistance. Prime Minister George Papandreou said the country doesn’t need to borrow from European nations. Greece bonds have slumped on concern the government isn’t acting quickly enough to plug a budget deficit that was almost 13 percent of gross domestic product last year, more than four times the EU’s limit. The European Commission said Jan. 27 that Greece hasn’t done enough to tame the shortfall. Yield Climbs The yield on 10-year Greek bonds rose to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. The yield is more than 3.9 percentage points higher than benchmark German bunds, the biggest gain since October 1998. The cost of insuring the country’s debt against losses rose to a record yesterday, with credit-default swaps jumping 40 basis points, or 0.4 percentage point, to 414, CMA DataVision prices show. Swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is equal to $1,000 a year on a contract protecting $10 million of debt. The swaps have risen from 121.8 basis points in October, and compare with 433.4 basis points for Dubai in the weeks before it received cash from Abu Dhabi on Dec. 14. ‘Clock Is Ticking’ “I am not sure that a Greek default is inevitable, but the clock is ticking with regard to difficult policy choices,” Marc Seidner , a portfolio manager at Pacific Investment Management Co. in Newport Beach, California, wrote in an e-mailed response to questions. Any financial aid from other European nations would be conditional upon the government introducing new measures to clean up its public finances, Le Monde said. Help would consist of bilateral loans from European governments in the absence of a mechanism for a euro-region bailout, the newspaper said. “There is absolutely nothing to these rumors,” German Finance Ministry spokeswoman Jeanette Schwamberger said in an e- mailed statement from Berlin following the report. “They are without any foundation.” A French Finance Ministry official in Paris also denied the story. ECB President Jean-Claude Trichet said in an interview in Davos, Switzerland, that he’s “confident” Greece will take the right steps. Greece is being victimized by rumors in financial markets, Papandreou said in an interview yesterday at the World Economic Forum’s annual meeting in Davos. “Rumors can overtake the international markets,” he said. “This is, of course, unfair.” ‘Buffer’ for Greece Being a part of the euro has helped “buffer” Greece from an even more drastic reaction in markets, Papandreou said. Greece is determined to meet the EU’s deficit-reduction goals on its own, and the Greek people understand that “painful” measures are needed to cut the shortfall, he said. The bonds of other so-called peripheral European nations dropped. The yield premium investors demand to hold Portuguese bonds instead of bunds increased 17 basis points to 120 basis points, the widest since April 28. Moody’s Investors Service said yesterday Portugal needs a “credible plan” to avoid “further downward pressure on its ratings.” Spreads between Spanish and German debt climbed 8 basis points to 98 basis points. The Italian-German spread rose 6 basis points to 94 basis points. “Greece is the canary-in-the-coal-mine for the entire sovereign risk concern, but the problem goes beyond Greece to all high-debt, high-deficit sovereigns” Seidner said. ‘Corporates as Well’ Investor concern that Greece can’t tackle its budget deficit is hurting the debt of national utility companies and banks, said Philip Gisdakis , head of credit strategy at UniCredit SpA in Munich. “If you fear a Greek crisis then you should not only avoid government bonds but corporates as well,” Gisdakis said. “And if you fear Greece, you should also fear Portugal and Spain.” Contracts on Hellenic Telecommunications rose 10.5 basis points to 149.5 and National Bank of Greece increased 16 basis points to 372. Portugal Telecom climbed 13 to 111 and Energias de Portugal jumped 9 to 100, CMA prices show. “The trend is for wider spreads, and it’s difficult to go against the trend at the moment,” said Wilson Chin , a fixed- income strategist at ING Groep NV in Amsterdam. “The market is looking for some kind of development.” To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net ; Keith Jenkins in London at Kjenkins3@bloomberg.net

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Stocks Fall as Dollar, Treasuries Gain; Greek Bonds Slide for a Third Day

January 28, 2010

By Michael P. Regan and Rita Nazareth Jan. 28 (Bloomberg) — U.S. stocks slid and European shares reversed gains, while the dollar and shorter-term Treasuries rose, as Qualcomm Inc.’s forecast disappointed investors and speculation of a Greece bailout was quelled. The Standard & Poor’s 500 Index slid 0.8 percent, wiping out yesterday’s gain and sending the gauge below its lowest close since November, while Europe’s Dow Jones Stoxx 600 Index reversed a 1.4 percent rally and fell 1.1 percent at 1:54 p.m. in New York. The Dollar Index, which tracks the currency against six major counterparts, added 0.3 percent for a third day of gains. Treasury two-year notes rose, sending their yield down five basis points. Copper fell 3 percent, a third straight drop. Technology shares led U.S. equities lower as Qualcomm, the largest maker of mobile-phone chips, said a “subdued” economic recovery led to its reduced forecast. Greek bonds slid a third day, sending yields on 10-year debt above 7 percent, and costs to protect against default rose to a record as investors doubted the nation will be able to avoid a European Union bailout. “The global economy is still very fragile,” said Stanley Nabi , New York-based vice chairman of Silvercrest Asset Management Group, which manages $8.5 billion. “On the corporate side, the earnings picture is mixed. As far as Greece is concerned, it is a flag of caution. What if Greece says I can’t pay my obligations? Not that they’re going to do that. If they say that, forget about the euro zone.” Global Losing Streak The MSCI World Index of 23 developed nations’ stocks lost 0.9 percent for a seventh day of declines, the longest streak in 11 months. The euro weakened against 12 of 16 major currencies, sliding 1 percent versus the South Korean won and 0.3 percent against the U.S. dollar. Global equities and U.S. index futures advanced before the open of exchanges in New York. President Barack Obama said in his State of the Union address last night that “the worst of the storm has passed” and he wasn’t interested in “punishing banks.” Obama’s plan to end proprietary trading and hedge-fund investments at banks, coupled with uncertainty over Federal Reserve Chairman Ben S. Bernanke ’s confirmation for another term and China’s moves to curb lending, contributed to a 5.1 percent slide in the S&P 500 in the final three days of last week. That was the biggest three-day tumble since the index plunged to a 12-year low in March. U.S. stocks erased gains from a late-day rally yesterday triggered when Fed policy makers upgraded their economic outlook and pledged to keep interest rates at a record low for an “extended period,” helping offset investor concern this week that China is withdrawing stimulus. ‘Panned By Bloggers’ Apple Inc. slid as much as 4.4 percent to help lead today’s decline in technology stocks, a day after the company introduced its iPad tablet computer. “Apple’s iPad is getting panned by bloggers all over the place,” said Peter Misek , a Toronto-based analyst at Cannacord Adams. “They cite the lack of multitasking, the lack of Verizon, the lack of flash support and the name. We view much of the criticism as unfair and near-term as updates will solve nearly all of their concerns. We would use extreme weakness as a buying opportunity.” Britain’s FTSE 100 Index slumped 1.4 percent to below its lowest close in almost three months, extending declines after Standard & Poor’s said the nation’s lenders are no longer among the most “low-risk” banking systems. Royal Bank of Scotland Group Plc erased a 3.9 percent advance and fell 1.3 percent. Greek Bonds Greek bonds extended losses amid concern the government will struggle to narrow a budget deficit of almost 13 percent of GDP last year, the highest in the European Union. The 10-year note yield rose 41 basis points to a 10-year high of 7.16 percent, adding to yesterday’s 51-basis point surge. The yield premium investors demand to hold the Greek securities instead of benchmark German bunds increased to 3.96 percentage points. That’s near the highest premium since October 1998, near the time when hedge fund Long-Term Capital Management LP collapsed amid risky bets on bond spreads. The German and French governments denied a report in the newspaper Le Monde that European Union member states are examining ways to provide financial assistance to Greece. “We need no bilateral loan,” Prime Minister George Papandreou told reporters in Davos, Switzerland, today. “We never asked for it.” Copper for delivery in three months fell 3.3 percent to $3.117 a pound in New York on concern that demand may wane in China. Aluminum slumped 3.3 percent in London, while lead and tin retreated at least 1.7 percent. Gold for immediate delivery fluctuated. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Moynihan, Gruebel, Ackermann Plot Response to Regulators in Davos Meeting

January 28, 2010

By Christine Harper and Aaron Kirchfeld Jan. 28 (Bloomberg) — Leaders of some of the world’s biggest banks met today on the sidelines of the World Economic Forum in Davos, Switzerland, to plot ways to reassert their influence with regulators and governments. Chief executive officers, including Bank of America Corp.’s Brian Moynihan and UBS AG’s Oswald Gruebel , convened one week after U.S. President Barack Obama shocked financiers with plans that may force large banks to limit their size and curb investments in hedge funds and private equity. The closed-door meeting, held down a hallway near the back entrance of the Davos conference center, aimed to prepare executives for another private meeting in Davos on Jan. 30 with top policy makers and regulators, including U.S. House Financial Services Committee Chairman Barney Frank . “We’re trying to figure out ways that we can be more engaged,” Moynihan said in an interview after he left the meeting with about 30 financial CEOs. “Because, honestly, we were not considered to be the right kind of people to talk to for the ideas on how to fix this thing.” Moynihan said that much of the discussion was about tactics, such as who the executives should approach and when. He said the bankers were concerned that too much regulation could hamper economic growth and that conflicting national approaches need to be avoided. ‘In Consensus’ “It was a positive meeting, we’re in consensus,” Gruebel said during a break in the three-hour session, declining to provide further details. “Global banks would like to have a level playing field, but regulators have a national view and politicians too.” The attendees included Deutsche Bank AG CEO Josef Ackermann , Credit Suisse Group AG CEO Brady Dougan , Barclays Plc President Robert Diamond and HSBC Holdings Plc Chairman Stephen Green . Leaders of many industries hold private meetings at the World Economic Forum every year. In a separate private gathering next door, Congressman Frank spoke to about 50 investors, including KKR & Co. co- founder Henry Kravis , Carlyle Group Managing Director David M. Rubenstein and Third Point LLC CEO Daniel Loeb . “The purpose of the meeting was to have a good sense of how do you develop good regulation at a time when there’s so much friction in the market,” said Jack Ehnes , CEO of the California State Teachers’ Retirement System, the second-biggest U.S. public pension fund, who attended the meeting. Frank’s Snow Boots Frank, wearing snow boots and an un-tucked shirt under his pin-striped suit, said after the session that he was going to “crack down” on hedge funds. He didn’t elaborate. Two participants at the bank CEO meeting said that Obama’s proposals didn’t dominate the discussion. “It’s a little hard to figure out exactly what the words mean, and that will be shaped over time,” Bank of America’s Moynihan said. He said Bank of America and some other banks have a “minimum” amount of profit and revenue derived from so- called proprietary trading and investments. Executives interviewed after the meetings said they understand that new rules are inevitable and urged national regulators to coordinate through the Group of 20 or other international bodies. Some executives said they think the biggest challenge for the industry is overcoming public anger about bonuses and compensation. “When you talk to politicians, the big issue is pay, pay, pay,” UBS’s Gruebel said. Even though the industry has taken steps to reform its pay practices, the public isn’t satisfied, he said. “You can’t say to anyone who’s lost his job that we used to pay someone 10 million and now we’re paying 1 million,” Gruebel said. To contact the reporter on this story: Christine Harper in Davos at charper@bloomberg.net ; To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Mice Tail Skin Cells Turned Into Brain Cells in Feat Possible for Humans

January 27, 2010

By Rob Waters Jan. 27 (Bloomberg) — Skin cells from the tails of mice were turned into neurons able to form connections crucial to brain function, a study said. The Stanford University scientists who performed the feat said it should work with human tissue. The research, published today in the journal Nature , is the latest demonstration that cells’ basic functions can be transformed by inserting or turning on the right genes in their DNA. In this case, that was accomplished without first turning the skin cells into the equivalent of embryonic stem cells before they were changed into different kinds of body cells. The work provides a more efficient way to make neurons from the skin of people with Alzheimer’s and Parkinson’s diseases than a method developed four years ago by Shinya Yamanaka of Kyoto University in Japan. Yamanaka’s breakthrough showed that skin cells from mice or humans could be made into stem cells and manipulated again to become any cell in the body. The paper “might be a landmark,” said Jeanne Loring , director of the Center for Regenerative Medicine at the Scripps Institute in La Jolla, California. “There’s a long history of failure in this field. Researchers tried for 30 years to convert a common cell type into neurons. People published papers, but no one ever made a real neuron.” Two years ago, Douglas Melton , a researcher at Harvard University’s Stem Cell Institute who focuses on diabetes, showed that one cell in the pancreas could be turned into another without first reverting to a primitive, embryo-like cell. Melton said the Stanford work was a major advance because it starts with cells that can be easily obtained from a person. Fat, Skin, Hair “If you wanted to make more cells for yourself, the ones you’d be willing to give up are fat, skin, hair, blood — not brain cells,” Melton said. The process also takes a more direct route to changing the function of cells than Yamanaka’s method, Melton said. “Instead of trying to turn them back into pluripotent stem cells and then make those into differentiated cells, he’s short- circuiting that process and saying let’s go right from one readily available cell to another cell of interest,” Melton said in a Jan. 24 telephone interview. The research was led by Marius Wernig, an assistant professor of pathology at Stanford’s Institute for Stem Cell Biology and Regenerative Medicine . Wernig, 35, and his colleagues identified 19 genes that are active in neurons and inserted them into skin cells taken from the tails of young mice. The team used a type of virus known as a lentivirus to carry the genes into the skin cells. Cells Transformed After a month, a few of the skin cells showed signs of having turned into brain cells. The team then used a trial-and- error process to identify three genes from among the 19 that could do the job on their own. Using the three, Wernig’s team found that in just two weeks, 20 percent of the skin cells had morphed into neurons. “That means reprogramming doesn’t only go backward, but can occur in any direction,” Wernig said in a Jan. 22 telephone interview. “If you extrapolate from this, you could probably turn any cell in your body into any other cell if you just know the right factors. A year ago, I would not really have believed this was possible.” Wernig and his colleagues are trying to do the same thing with human cells and Stanford has applied for a patent on the process. If it works in human cells, researchers could use the method to turn skin cells from a patient with Parkinson’s or Alzheimer’s disease, for example, into neurons with the genetic defects that cause the condition. Studying Disease This would allow researchers to study the workings of the disease and to test drugs that might treat it, Wernig said. Two closely held companies, Ipierian Inc. of South San Francisco and Fate Therapeutics of San Diego are using similar approaches to develop therapies. New York-based Pfizer Inc., London-based GlaxoSmithKline Plc and Novartis AG , based in Basel, Switzerland, are among the major pharmaceutical companies with stem-cell programs. Before the cells have practical use, they’ll have to be shown to be true neurons, Loring said in a Jan. 25 e-mail. “The question now is how these genetically engineered neurons stack up against real neurons in a real test — can they be used to repair the brains of mice that have experimentally induced Parkinson’s disease, for example?” she said. “There’s a lot of work to do but it’s exciting.” To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net .

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Molecular Insight Announces Updates to Board of Directors

January 27, 2010

CAMBRIDGE, MA–(Marketwire – January 27, 2010) – Molecular Insight Pharmaceuticals, Inc. ( NASDAQ : MIPI ), a biopharmaceutical company discovering and developing targeted therapeutic and imaging radiopharmaceuticals for use in oncology, announced that David R. Epstein and Yvonne Greenstreet, M.D., have resigned from its Board of Directors. The resignations of Mr. Epstein and Dr. Greenstreet reflect significantly increased work commitments at their respective companies. Mr. Epstein recently was promoted to Head of Pharmaceuticals at Novartis and is relocating to Switzerland. Dr. Greenstreet serves as Senior Vice President and Chief of Strategy, Research and Development at GlaxoSmithKline.

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Soros Says Obama’s Financial Plan May Not Resolve `Too Big to Fail’ Issue

January 27, 2010

By John Fraher and Gavin Finch Jan. 27 (Bloomberg) — Billionaire investor George Soros said the largest financial institutions may be “too big to fail” even under President Barack Obama’s plans to rein them in. “Some of the banks will spin off investment banks that will still be too big to fail,” Soros said. He made the remarks in Davos, Switzerland, where he is attending the World Economic Forum. Soros’s comments came as bankers criticized Obama’s proposal last week to limit the size of banks and prohibit them from investing in hedge funds and private-equity funds as a way to reduce risk-taking and prevent a repeat of the credit crisis. Robert Diamond , president of London-based Barclays Plc, urged governments to coordinate regulation and resist the temptation to act in isolation before elections in the U.K. and the U.S. “It’s very important to step back and be very thoughtful about the role of trading and the role of risk in banks, because without risk we don’t have a banking industry,” Diamond said. Banks “willing to take cross border risks are essential to have jobs and economic growth,” he said. Deutsche Bank AG Chief Executive Officer Josef Ackermann also said the Obama initiative risked hindering global economic growth. “If you have fragmented, small players in the financial sector, meeting the requirements of global trade and production, you will have a dichotomy which is not going to work and would not be for the benefit of the real economy at the end,” Ackermann said. Soros also said it’s counterproductive to tax banks before the consequences of the financial crisis have been fully dealt with. To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net

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UBS Decision by Swiss Court on Tax Fraud May Prompt Negative U.S. Response

January 25, 2010

By David Voreacos, Carlyn Kolker and Ryan J. Donmoyer Jan. 25 (Bloomberg) — A Swiss court ruling that impedes the Internal Revenue Service’s ability to collect data on 4,450 UBS AG accounts may prompt the U.S. to revive a lawsuit that shaped the IRS crackdown on offshore tax evasion. The case involves an Aug. 19 agreement by UBS, the biggest Swiss bank, to settle a U.S. suit seeking data on clients suspected of dodging U.S. taxes. UBS ended the U.S. case by agreeing to hand over 4,450 accounts involving “tax fraud or the like.” That accord violated Swiss law by defining fraud too broadly, Switzerland’s Federal Administrative Court ruled in an opinion released Jan. 22. The ruling may force the U.S. back into federal court in Miami to challenge UBS, said New York tax lawyer Bryan Skarlatos . “The Swiss court may have just put UBS in the awkward position of not being able to fulfill the settlement terms,” said Skarlatos of Kostelanetz & Fink LLP. “In that case, the IRS may consider reopening the settlement to force UBS to give at least 4,450 names.” Switzerland’s government, which sought to preserve Swiss bank secrecy, negotiated the accord on behalf of UBS. The deal resolved a lawsuit that the U.S. filed Feb. 19, one day after UBS avoided prosecution by paying $780 million, handing over data on 255 accounts and admitting it aided tax evasion. With the settlement, the U.S. could say it got the data it sought and Switzerland could say it preserved Swiss bank secrecy, said Thomas Zehnle of Bryan Cave LLP in Washington. The ruling imperils that balance, he said. The U.S. may now be “back to Square One” and have to return to court, Zehnle said. ‘Water Under the Bridge’ “With so much water under the bridge now, I can’t imagine the Justice Department and the IRS backing off at this point,” he said. The U.S. could ask a federal judge in Miami to find UBS in contempt of court for not producing the names, said Scott Michel , an attorney at Caplin & Drysdale in Washington. The U.S. requested the data pursuant to a Swiss-U.S. tax treaty. UBS gave the data to the Swiss government, which must review it and hand it over to the IRS. “The UBS defense against a contempt charge is that it’s impossible for them to comply,” Michel said. “They turned the information over to the Swiss government, and it’s the Swiss government, through the courts, that is blocking their production.” The accord required UBS to hand over data on clients engaged in “tax fraud and the like.” It defined tax fraud in two ways. One way identified clients who hid their ownership through trusts, corporations or other structures. W-9 Form The other way required disclosure of accounts exceeding 1 million Swiss francs ($985,000) held by clients who didn’t give a required W-9 tax form to UBS. This method is considered tax evasion under Swiss law, a civil offense, compared with tax fraud, which is a crime, the court ruled. “Provided the taxpayer did nothing more than not declare income, an account or return the form W-9, consequently committing tax evasion under Swiss law, he hasn’t acted fraudulently,” five judges wrote in a ruling on a test case. In a statement after the ruling, the IRS said it has “every expectation that the Swiss government will continue to honor the terms of the agreement.” Switzerland hasn’t yet transferred UBS client data to the U.S. since it reached the accord in August, Minister Hans-Rudolf Merz told Sonntag in an interview. The Swiss tax office made decisions on about 600 cases so far, Merz told the newspaper. Bank Secrecy The Swiss court ruled earlier this month that the nation’s financial regulator broke Swiss law protecting bank secrecy last February when it turned over the 255 UBS accounts. U.S. prosecutors are combing that data and have said they opened 150 criminal tax investigations of UBS clients. Six UBS clients pleaded guilty in the past year, and several European financial professionals were indicted in the U.S. The IRS and Justice Department also are examining offshore accounts from banks around the world that 14,700 U.S. taxpayers voluntarily disclosed last year through a partial amnesty program. Under the August accord, UBS will fulfill its legal obligations when it discloses data on 10,000 accounts. The IRS hasn’t said how many of the 14,700 voluntary disclosures involved UBS accounts. For clients who disclosed their accounts to the IRS, the ruling last week will not matter, said tax attorney George M. Clarke III of Miller & Chevalier in Washington. “If you’ve already voluntarily disclosed, the government already has your name,” said Clarke. Tax attorney Kenneth Rubinstein said the publicity of the prosecutions and the lawsuit leading to the August accord helped drive the voluntary disclosure program. He said the U.S. will not reopen the Miami lawsuit given the program’s success. “This whole thing was a strategy, a PR strategy,” said Rubinstein, of Rubinstein and Rubinstein LLP in New York. “It was designed to get names — some from UBS, some from other banks, other countries.” To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net ; Carlyn Kolker in New York at ckolker@bloomberg.net ; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net .

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Mitsubishi Heavy Targets First European Reactor Sale in Challenge to Areva

January 25, 2010

By Shigeru Sato, Yuji Okada and Kati Pohjanpalo Jan. 25 (Bloomberg) — Mitsubishi Heavy Industries Ltd. , which has developed the world’s biggest atomic reactor, expects to win its first nuclear power plant order in Europe next year, challenging Areva SA in its own backyard. Japan’s largest heavy machinery maker anticipates a “high possibility” of a utility in northern Europe selecting its new 1,700-megawatt model that comes with advanced fault detection technology, Akira Sawa , head of the company’s atomic business, said in an interview. The U.K. and Switzerland have also sought atomic plant proposals from Mitsubishi Heavy, he said. “We should be able to expand smoothly into other European countries after Northern European governments, which impose tough regulations, sign off on our product,” Sawa, 61, said Jan. 19 in Tokyo. He declined to name the company or country Mitsubishi expects to win the order from. Teollisuuden Voima Oyj, the Finnish utility known as TVO, said it shortlisted Mitsubishi Heavy’s EU-APWR model along with reactors from Areva, Toshiba Corp., GE Hitachi Nuclear Energy and Korea Hydro & Nuclear Power Co. Asian suppliers are making competition tougher for France’s Areva, the world’s biggest reactor builder, which lost a $20 billion contract in the United Arab Emirates last month to a group led by Korea Electric Power Corp. “A European deal would be a big step for Mitsubishi as it expands its reactor business globally,” said Eiji Tomaru , an analyst at Mizuho Investors Securities Co. in Tokyo. U.S. Talks Mitsubishi Heavy agreed in July last year to hold talks with Luminant of the U.S. to supply two 1,700-megawatt APWR reactors to a plant near Dallas, aiming to clinch its first U.S. reactor sale. In Japan, the company has built 24 atomic power plants including a 912-megawatt reactor for Hokkaido Electric Power Co , which started operating last month. Mitsubishi Heavy has lost 14 percent in six months on the Tokyo Stock Exchange compared with a 0.44 percent gain in the benchmark Topix index. The stock fell 2.1 percent to 326 yen at the morning trading break. Finnish Utilities TVO, Fortum Oyj , Finland’s biggest utility, and the E.ON AG -led Fennovoima Oy venture are competing for a permit to build a sixth atomic generator in the country. The government has said it may decide on adding a reactor by March. The Olkiluoto power station operated by TVO currently has two reactors. The utility is building a third and plans to add a fourth unit, for which it has shortlisted Mitsubishi. Fortum’s Loviisa station has two reactors, while Fennovoima has none and proposes to build one plant. TVO may start construction of its proposed fourth reactor by 2014, Anneli Nikula , adviser to TVO, said in a Jan. 21 telephone interview. Mitsubishi Heavy hasn’t been shortlisted by Fortum, which is considering models by Areva, GE Hitachi, Toshiba, Korea Hydro and Atomstroyexport ZAO. “The Mitsubishi reactor isn’t one of our options,” Sasu Valkamo, who heads Fortum’s new reactor project, said by telephone on Jan. 21. “That was decided before we filed our permit application.” Terrorist Threat Fennovoima is considering Areva and Toshiba plants, said Juhani Hyvaerinen, the company’s executive vice president for nuclear engineering. These were “at the time more adapted to the Finnish specifications,” he said. “Fennovoima’s list is very short and many good reactors were left out.” The threat of terrorist attacks, coupled with the legacy of nuclear accidents at Three Mile Island in 1979 and Chernobyl in 1986, mean a revival in atomic power is accompanied by increased demands for safety. Mitsubishi Heavy, Areva and Toshiba are among companies that make plants capable of withstanding impact by an aircraft. Sawa said Mitsubishi Heavy’s EU-APWR is equipped with a digital control panel that would alert workers to mechanical faults faster than conventional analogue gauges, thereby reducing the risk of accidents. “These attempts to provide safer reactors are a response both to terrorist events such as 9/11, which have made the possibilities of unlikely events all the more real alongside public concerns about the health effects of radiation after a catastrophic accident,” said Daniel Aldrich , a political science assistant professor at Purdue University in Indiana. A partial meltdown at the Three Mile Island plant in Pennsylvania was the biggest nuclear accident in the U.S. On April 26, 1986, the No. 4 reactor at the Chernobyl nuclear plant exploded in Ukraine, leaking radiation into the atmosphere. Winds carried the fallout across Europe to Germany. To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net ; Yuji Okada in Tokyo at yokada6@bloomberg.net ; Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

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Guys, Gals Hooking Up Is Sexy Idea to Trim Debt: William Pesek

January 20, 2010

Commentary by William Pesek Jan. 21 (Bloomberg) — Music shops in Tokyo would be wise to stock up on their Barry White . That may be among the more intriguing side effects of Finance Minister Naoto Kan this week asking his staff to work shorter days so they have more time for dates. He’s making good on his pledge to rein in the bureaucrats who run the economy. OK, so it sounds a bit creepy. Governments such as Singapore’s have created dating programs that drummed up more ridicule than long-term hook-ups. Yet there are three reasons to applaud Kan’s racy suggestion. One, it may increase Japan’s birthrate. Two, it may boost productivity. Three, it may help alter the mechanisms of Japan Inc . Progress in all three areas is vital to reducing a debt that is roughly double the size of Japan’s $4.9 trillion economy. And yet no finance minister has made an impression on any of them in the last two decades. It’s time for fresh thinking and unconventional policies. Anything that improves Japan’s plight even marginally is worth a try. First, the birthrate. Some demographers predict Japan may become Asia’s Switzerland, proving that living standards need not shrink with a nation’s population. Others point out that Japan’s enthusiastic embrace of robotic technology will lessen the fallout from a rapidly aging population. Demographic Fate Such views only make sense if a government aggressively plans for its demographic fate. The Liberal Democratic Party , which ran Japan virtually uninterrupted for 54 years until August, certainly didn’t. The current government has been preoccupied with short-term challenges, including a recession. Kan’s Democratic Party of Japan is working to tweak tax policies to encourage families to have more kids. Government inaction in general, though, has put the onus on private industry. In November 2008, for example, Keidanren , Japan’s biggest business organization, urged member companies to encourage employees to have more sex. Japan, after all, routinely scores low on annual sexual- frequency surveys by condom maker Durex. In the latest , 34 percent of Japanese respondents said they have sex once a week, compared with 87 percent in Greece and 53 percent in the U.S. That may go a long way to explaining why Japan’s population, now 126 million, is shrinking. Avoiding Japan Investors such as Jim Rogers , author of “A Bull in China,” cite the disconnect between Japan’s massive debt and declining birthrate when asked why they tend to avoid Asia’s biggest economy. Encouraging candle-lit dinners, seductive music and romance is hardly the purview of finance ministers. It’s still heartening to see Kan tiptoeing up to an issue that has been neglected for too long. Productivity is also an obstacle, particularly as the influence of low-cost China and India grows. The only way for high-cost Japan to maintain its prosperity is to get workers to produce more. The trick is to do that while enhancing a work- life balance for which Japan Inc. has rarely had any regard. “U.K. Treasury officials finish work at 6 p.m. or within regular hours and their productivity or work quality” isn’t inferior to Japan’s, Kan said at a Jan. 19 press conference. Japan Airlines Corp .’s bankruptcy shows the extent to which the corporate culture needs a giant rethink. Halting the tradition of pouring state funds into uncompetitive companies is a vital step. So is getting Japanese out of the mindset that they need to work 10 or 12 hours a day when eight should do. Fewer smoking breaks might help. Population Drag The Organization for Economic Cooperation and Development has long argued that increased labor productivity in Japan — which it puts at 30 percent below the U.S. level — is needed to offset the drag from an aging population. Bureaucrats personify barriers to getting there. One reason they work into the night and don’t date much is to craft talking points for Cabinet officials. Here’s a revolutionary thought: Let them speak for themselves, unencumbered by input from unaccountable apparatchiks pursuing their own agendas. Too many bureaucrats work for themselves, not Japanese taxpayers. The aim is to ride the “amakudari” gravy train. The word, meaning “descent from heaven,” refers to the offensive practice of public servants getting cushy gigs in industries they oversaw in government. Their incentive is to look out for their future employers, not the average Japanese household. The DPJ vows to curtail the practice, though that’s easier said than done. Such arrangements are the Japanese version of Whac-a-Mole. Just as you find one and knock it down, another pops up. Japan must kill this corrupt game for good. Getting staffers to go home earlier might reduce government personnel costs. The bigger issue is seeing to it that parliamentary members and Cabinet officials stop relying on entrenched desk-jockeys to do a job better done by themselves. Japan has relied on bureaucrats for decades and look where its economy is. It’s time for a change. If it helps to leave work at 6 p.m. and date more, then so be 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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Federer Struggles as Williams Eases Into Second Round of Australian Open

January 19, 2010

By Rob Gloster Jan. 19 (Bloomberg) — Top seeds Roger Federer and Serena Williams took contrasting paths into the second round of the Australian Open tennis tournament. Federer, a three-time champion at Melbourne Park, rallied to beat 37th-ranked Igor Andreev of Russia in four sets. Federer had to fight off three set points in the third set that would have left Andreev a set from winning the match. “I was lucky to get out of that one,” Switzerland’s Federer said in a televised courtside interview after his 4-6, 6-2, 7-6 (7-2), 6-0 victory. “It was a fortunate third set for me today.” Federer, who’s seeking a record-extending 16th major championship, dropped a set in his opening match of a Grand Slam tournament for the first time since the 2003 U.S. Open, when he lost the first set to Jose Acasuso . Defending women’s champion Williams, playing her first Grand Slam match since her outburst at the U.S. Open, eased past Urszula Radwanska 6-2, 6-1. The 28-year-old Williams, her right thigh wrapped in a bandage to protect her hamstring, improved her career mark to 41-0 in Grand Slam first-round matches with her win over Radwanska, 19, of Poland. “I’ve been having it strapped all week, all last week as well,” Williams said when asked about the bandage at a news conference. “So just keeping it up and making sure I’m able to keep moving as best as I can.” Seeking Repeat Williams, who also won the Australian Open in 2003, 2005 and 2007, is trying to become the first repeat women’s champion in Melbourne since Jennifer Capriati in 2002. Williams lost her last Grand Slam match, a semifinal at the U.S. Open, when she forfeited match point for lambasting a lineswoman who called her for a foot fault. The tirade led to a $175,000 fine. “The whole incident was a learning experience,” Williams said. Her sister, sixth-seeded Venus, defeated Lucie Safarova of the Czech Republic in straight sets to reach the second round of the Australian Open. The American won 6-2, 6-2. Other seeded women to advance on the second day of the season-opening major included No. 8 Jelena Jankovic of Serbia, No. 11 Marion Bartoli of France, No. 13 Samantha Stosur of Australia and No. 20 Ana Ivanovic of Serbia. No. 6 Nikolay Davydenko of Russia, No. 9 Fernando Verdasco of Spain, No. 10 Jo-Wilfried Tsonga of France and No. 12 Gael Monfils of France all advanced on the men’s side. Eighth-seeded Robin Soderling , last year’s French Open runner-up, became the highest men’s seed to go out, losing a five-set match. No. 16 Tommy Robredo of Spain and Sam Querrey , a 25th-seeded American, also were eliminated. Davydenko Challenge Davydenko won 6-1, 6-0, 6-3 over unseeded German Dieter Kindlmann and said he was ready to challenge Federer and second- seeded Rafael Nadal of Spain, who’ve won 14 of the last 16 Grand Slam titles. The 28-year-old Davydenko has won 10 straight matches, including the ATP World Tour Finals in London and a tournament in Doha. He defeated Federer and Nadal at each of those events. “I feel like I can beat everyone,” Davydenko told reporters. “Before now, mostly I was losing against these guys. But now I can beat everyone, it’s a good feeling.” To contact the reporter on this story: Rob Gloster in San Francisco at rgloster@bloomberg.net

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Loan Prices Reach Two-Year High on Improving Default Rate: Credit Markets

January 18, 2010

By Paul Armstrong Jan. 19 (Bloomberg) — Prices of high-yield loans in Europe hit a two-year high as the improving outlook for corporate defaults and the economy open up financing for leveraged buyouts. The average price for actively traded so-called leveraged loans climbed 7 basis points to 96.07 percent of face value since Jan. 1, according to Standard & Poor’s Leveraged Commentary & Data. The price of the debt, mostly used to finance mergers and acquisitions, reached the highest level since Dec. 13, 2007. A year ago, loans traded at 60.4 percent of face value. Demand for riskier assets is returning as Moody’s Investors Service forecasts that the default rate among speculative-grade companies will drop to 3.3 percent this year from 12.5 percent now. London-based private-equity firm Apax Partners LLP is raising 315 million pounds ($517 million) to finance its acquisition of Marken Ltd. in the first European LBO this year, according to data compiled by Bloomberg. “Investors are now looking at leveraged loans as a product offering attractive yields with limited downside,” said Edward Eyerman , head of leveraged finance at Fitch Ratings in London. Elsewhere in credit markets, the extra yield investors demand to own European investment-grade corporate bonds rather than government debt increased 1 basis point to 152, near the lowest level since February 2008, according to Bank of America Merrill Lynch index data. The spread on the European high-yield index narrowed 1 basis point to 699. A basis point is 0.01 percentage point. Spreads Narrow Spreads on investment-grade debt will narrow 20 basis points over the “near term” from 125 basis points now because of government measures to combat the credit crisis, Moody’s said yesterday in a report. Bonds rated below Baa3 by Moody’s and BBB- by Standard & Poor’s are considered below investment grade. Credit Suisse Group AG , Switzerland’s biggest bank by market value, sold 2.25 billion euros ($3.24 billion) of seven- year notes yesterday in its first deal in the currency since Dec. 2, according to data compiled by Bloomberg. The 3.875 percent securities due in seven years were the only European benchmark corporate notes yesterday, a U.S. holiday, compared with a daily average of 5.3 billion euros. Slovenia sold 1.5 billion euros of 10-year bonds, joining governments from Mexico to Indonesia in the busiest start to a year for developing-nation foreign borrowing in a decade. Officials from Vietnam are meeting with investors in London today to market a $1 billion offering of 10-year notes. Albania plans to sell its first international bonds and is preparing to hire a bank to manage a sale of 300 million euros in three- or five-year notes, the Finance Ministry said. Credit-Default Swaps The cost of insuring against losses on European corporate bonds using credit-default swaps fell to near the lowest level in 19 months. The high-yield Markit iTraxx Crossover Index dropped 9 basis points to 404, according to JPMorgan Chase & Co. prices. The index is a benchmark for the cost of protecting bonds against default and a decline signals an improvement in perceptions of credit quality. Credit-default swaps on Greek debt fell to 313 basis points from a record 344.5 on Jan. 14, according to CMA DataVision prices. European government officials met in Brussels yesterday to discuss Greece’s deteriorating finances. Swaps on Iceland, whose economy buckled in October 2008 under $80 billion of debt at its three largest banks, rose 1.5 basis points to 545, CMA prices show. The nation’s credit risk may rise “considerably” should a proposed emergency bailout fail and its government collapse, S&P said yesterday. ‘Fragile’ Recovery The Markit iTraxx SovX Western Europe Index of default swaps on 15 European countries fell 3 basis points to 76 yesterday, after rising to a record 78.5 from 46 when it started trading in September, according to CMA. At the high point, it cost $78,500 a year to protect $10 million of debt from default for five years. International Monetary Fund Managing Director Dominique Strauss-Kahn said yesterday it’s too early for policy makers to withdraw stimulus measures, describing the recovery as “fragile.” Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. Contracts on Northfield, Illinois-based Kraft Foods Inc. rose 1 basis point to 76.5, CMA said. The company is in talks to increase its bid for Cadbury Plc to as much as 12.1 billion pounds, according to a person with knowledge of the matter. Swaps tied to bonds sold by Uxbridge, England-based Cadbury climbed 5 basis points to 76.5, CMA prices show. Leveraged Loans Leveraged loans in Europe will return between 7 percent and 9 percent this year, Barclays Capital forecasts. Investors have earned a 1.27 percent return on the debt this year, the London- based bank’s data show. “A lot of companies refinanced their loans at par in the bond market so that drives returns,” said Axel Potthof , senior vice president of Allianz Global Investors in Munich. Lloyds Banking Group Plc is arranging the loan for Apax, according to a person familiar with the plans. Apax didn’t disclose the price for the U.K. vaccine courier when it agreed to buy Marken from Intermediate Capital Group Plc last month. The loan includes 150 million pounds of six-year term loans that pay 4.5 percentage points more than benchmark rates, 150 million pounds of seven-year debt with a spread of 5 percentage points and a 15 million-pound, seven-year revolving credit with a 4.5 percentage-point spread, according to the person. Fiona Mulcahy , a London-based external spokeswoman for Apax, declined to comment. LBO Debt When Apax bought a stake in U.K. publisher Trader Media Group Ltd. in 2007, it paid interest margins on loans of 2.25 percentage points, Bloomberg data show. Marken’s debt equals four times its earnings before interest, tax, depreciation and amortization, the person said. The LBO market, where buyers acquire companies using mostly debt financing, collapsed in 2007 when underwriters got stuck with $200 billion of loans they couldn’t sell as credit markets froze. Demand for higher-yielding securities is increasing again as Europe’s economy returns to growth. The region will expand 1.4 percent in 2010, according to the median forecast of economists surveyed by Bloomberg News. Growth resumed in the third quarter as governments stepped up spending and exports increased for the first time in 1 1/2 years, the European Union’s statistics office in Luxembourg said Dec. 3. Gross domestic product in the 16-nation euro region rose 0.4 percent from the second quarter, when it dropped 0.2 percent. “If you’re a high-yield bond investor, you can buy another new bond, but if you are a loan investor, you don’t have that option, you will need to reinvest in the secondary market,” said Alex Moss , a fund manager at Insight Investment Management in London. To contact the reporter on this story: Paul Armstrong in London at Parmstrong10@bloomberg.net

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Morgan Stanley-Handled IPOs Beating Competitors in Equity Capital Markets

January 15, 2010

By Michael Tsang Jan. 15 (Bloomberg) — Initial public offerings arranged by Morgan Stanley are performing better than any on Wall Street, helping the securities firm gain market share with IPOs poised to triple this year. The eight U.S. companies that listed New York-based Morgan Stanley first among underwriters for initial sales in the past year added 18 percent in their first month of trading, the most for investment banks credited with at least $1 billion of deals, data compiled by Bloomberg show. In contrast, the companies that hired JPMorgan Chase & Co. saw their market capitalization shrink by 0.9 percent, while those taken public by Credit Suisse Group AG posted the smallest advances even after the Zurich- based lender reduced the offering prices by the most on average. The sales helped Morgan Stanley boost its share of U.S. company IPOs, among the most lucrative generators of fees for banks, to 18 percent from 2.2 percent, Bloomberg data show. After equities rebounded from their swoon a year ago, IPOs are projected to increase to as much as $50 billion from about $16.5 billion in 2009, according to estimates from London-based Barclays Plc and Bloomberg. “Clearly, Morgan Stanley did a better job,” said Philip Orlando , the New York-based chief equity market strategist at Federated Investors Inc., which oversees $392.3 billion. “The lead underwriter has certainly got many masters. You want to see the pricing come at the high end of the range, yet there still be a full book and an appreciation of the share price once the stock trades publicly.” Highest Fees Banks earned fees of 5.6 percent from IPOs last year, more than 10 times higher than those from mergers and acquisitions or corporate bonds, data compiled by Bloomberg show. “IPOs represent one of the most important products at investment banks because they are profitable, establish meaningful relationships and lead often to future business,” said Alexander Gendzier , who advises bankers and companies on capital markets for Washington-based law firm Jones Day. Being the first bank listed on the prospectus , or the so- called lead left, typically means that firm is the underwriter that “runs the show,” according to Reena Aggarwal , a finance professor at Georgetown University in Washington. While most IPOs are arranged by two or more banks, the lead left underwriter often decides how many shares each bank in the selling syndicate receives and is usually responsible for supporting the IPO’s price after it starts trading, she said. A123, Fortinet Morgan Stanley helped companies from A123 Systems Inc. to Fortinet Inc. raise a total of $2.68 billion through initial offerings in the past year, 13 percent more than indicated by the midpoints of their original IPO price ranges, according to Bloomberg data that accounts for the size of each deal. A123 , a maker of lithium batteries for plug-in cars, filed with the U.S. Securities and Exchange Commission in September to sell shares at $8 to $9.50 each, and boosted the range to as high as $11.50 before offering the stock at $13.50. The Watertown, Massachusetts-based company’s IPO raised $428.3 million, 54 percent more than indicated by the original midpoint price, Bloomberg data show. The shares climbed 80 percent in the first month of trading on speculation A123 will benefit from the Obama administration’s efforts to cut gasoline and carbon exhaust. The surge was almost double the advance of any of the 47 U.S. IPOs last year, data compiled by Bloomberg show. ‘Best Barometer’ Morgan Stanley, the third-largest U.S. IPO underwriter by market share, also led the $179.7 million offering by Fortinet , the first Silicon Valley startup to go public in almost two years. The Sunnyvale, California-based maker of all-in-one network-security equipment said in October it would sell shares at $9 to $11 each, before pricing them at $12.50 on Nov. 17. The stock climbed 36 percent in the month after its IPO. “Regardless of market conditions, maximizing price for the issuer and having it trade well for the investor is the best barometer for success in the IPO business,” said Mohit Assomull , Morgan Stanley’s head of Americas equity syndicate in New York. An IPO that prices higher than its forecast range may spur underwriters to allot smaller stakes to buyers, which helps boost the stock as those investors purchase more once trading begins, according to Richard D. Truesdell Jr ., co-head of the capital markets group at Davis Polk & Wardwell LLP. His New York-based law firm was the top legal adviser for U.S. IPOs in 2009, according to data compiled by Bloomberg. ‘Hot IPO’ When banks are forced to reduce prices due to lack of demand, buyers get more shares in the IPO and push the stock lower once it starts trading, Truesdell said. “Pricing above the range tends to generate demand and help make it a hot IPO,” he said. “I’d be surprised if the underwriters that were getting the highest offer prices weren’t also generating the best performance.” The 11 companies that listed Charlotte, North Carolina- based Bank of America Corp. as the lead left underwriter rose 13 percent on average in the first month, making the largest U.S. bank the second-ranked arranger. Bank of America sold its IPOs at 5.3 percent above the midpoints indicated by their forecast ranges, also the second-highest. “We are intensely focused on the execution of our IPOs both for the issuer in achieving an appropriate IPO valuation and for investors who are looking for high-quality deals that will perform over the medium- and long-term,” said Lisa Carnoy , Bank of America’s New York-based global head of equity capital markets. Citigroup, Goldman Sachs Citigroup Inc. ranked third, with its two initial offers climbing an average of 12 percent. Goldman Sachs Group Inc. was fourth with a 10 percent gain for six IPOs. Both firms are based in New York. “The strong market reaction to these IPOs is a reflection of the issuers’ value proposition, as well as well-structured and distributed transactions,” said John Chirico , the co-head of capital markets origination for the Americas at Citigroup. Goldman Sachs received the biggest share of the $923 million in fees from U.S. IPOs last year, data compiled by Bloomberg show. The most profitable firm in the history of Wall Street made $191.6 million participating in 21.2 percent of offerings, while Morgan Stanley earned $156.1 million. Andrea Rachman , a spokeswoman at Goldman Sachs, declined to comment. The number of initial offerings has increased in the past four months from the slowest pace on record. Sales had evaporated in the fourth quarter of 2008 as the failure of New York-based Lehman Brothers Holdings Inc. froze credit markets. IPO Drought The drought extended into the first eight months of last year when an average of two U.S. companies went public a month, the lowest level since at least 1995, data compiled by Bloomberg show. The IPO market rebounded as the Standard & Poor’s 500 Index surged 70 percent from its 12-year low in March. The revival didn’t coincide with bigger returns for investors in new offerings. Almost 40 percent of U.S. IPOs in the second half of 2009 fell, data compiled by Bloomberg show. Three of the six IPOs by New York-based JPMorgan last year declined during the first month of trading. RailAmerica Inc., the railroad operator owned by New York-based Fortress Investment Group LLC , dropped the most, slumping 17 percent . The $15 IPO price for Jacksonville, Florida-based RailAmerica was below the range of $16 to $18 a share, Bloomberg data show. JPMorgan , the second-biggest U.S. bank, was also listed first among underwriters for three of the 11 IPOs that were postponed in the second half after pricing terms were set. Morgan Stanley was the lead left underwriter for Aviv REIT Inc. , the Chicago-based real-estate investment trust that pulled its offer in November. Credit Suisse The U.S. companies that listed Credit Suisse , Switzerland’s largest bank by market capitalization, as the first underwriter sold shares at an average discount of 19 percent, the most based on the original midpoint offer price, Bloomberg data show. The calculation excludes offerings, such as funds raising money to buy assets, that didn’t have price ranges. “You’re always trying to achieve pricing at the time of the IPO that works both for the issuer and the investors,” said Jeffrey Bunzel , the New York-based head of equity capital markets for the Americas at Credit Suisse. “Even though there was a pricing concession, at the end of the day, the transactions worked, and both the issuers and the investors walked away feeling that under the market circumstances they were successful.” Cloud Peak Cloud Peak Energy Inc. in Gillette, Wyoming, declined 8.3 percent in its first month of trading. Credit Suisse cut the price for the November IPO by as much as 17 percent. The U.S. coal unit of London-based Rio Tinto Group raised $459 million at $15 a share after seeking $16 to $18, Bloomberg data show. Credit Suisse’s Bunzel said that four-week returns don’t fully reflect the share-price gains for IPO investors. The firm’s six offerings, from San Diego-based Bridgepoint Education Inc. in April to Kraton Performance Polymers Inc. of Houston last month, climbed 27 percent from the time of their IPOs through yesterday, according to data compiled by Bloomberg. The average, which doesn’t account for the different periods that each company has been trading, is the second-highest for 2009. Citigroup’s two offers had an average rise of 54 percent. While the six IPOs that listed JPMorgan as the first underwriter produced losses on average in the first month, Brian Marchiony , a New York-based spokesman at JPMorgan, pointed to the performance of all 17 deals in which the firm was credited as an underwriter. Those IPOs have returned 31 percent on average since their offers, the biggest gain of any bank. ‘Point of View’ Taking an average from an underwriter’s offerings by their share-price performance since the IPOs without accounting for how long each company has been publicly traded may skew the results because it compares “apples and oranges,” according to Georgetown’s Aggarwal, who has studied IPOs for 20 years. “I can see from the underwriter’s point of view that they want to present the data that makes them look good,” she said. “From an academic point of view, you obviously can’t do that.” Aggarwal said an IPO’s first month of trading versus the broader market provides a gauge of each underwriter’s performance. By that measure, Credit Suisse’s deals gained an average of 2.4 percentage points more than the S&P 500, the smallest outperformance, while JPMorgan’s IPOs fell 3.4 percentage points versus the index. The IPOs handled by Morgan Stanley rose 15 percentage points more than the S&P 500 in the first four weeks of trading, while Citigroup’s IPOs beat the index by 17 points on average. The first U.S. IPOs of 2010 are scheduled for next week, with three sales set for Jan. 21, Bloomberg data show. Symetra Financial Corp., the Bellevue, Washington-based life and health insurer whose largest shareholders are Warren Buffett’s Berkshire Hathaway Inc. and White Mountains Insurance Group Ltd., plans to raise as much as $378 million. Omaha, Nebraska-based Berkshire and White Mountains of Hanover, New Hampshire, won’t cut their stakes, Symetra said last week. Bank of America is the lead left underwriter. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net

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UBS, Credit Suisse Had Outflows on Italy Tax Amnesty, Morgan Stanley Says

January 15, 2010

By Warren Giles Jan. 15 (Bloomberg) — UBS AG , Credit Suisse Group AG and Julius Baer Group , Switzerland’s biggest wealth managers, may have lost as much as 18 billion Swiss francs ($17.6 billion) in assets through an Italian tax amnesty, Morgan Stanley estimates. Clients withdrew between 3 billion francs and 7 billion francs from the wealth management divisions of both UBS and Credit Suisse to take advantage of the program’s 5 percent fine, the Morgan Stanley analysts, including Huw van Steenis , estimated in a note to investors today. Julius Baer may have lost between 1 billion francs and 4 billion francs, they said. “The Italian tax amnesty has been slightly more successful than the market first thought,” the analysts wrote. As a result, fourth-quarter outflows at Zurich-based UBS were probably higher than analysts estimated, and above the previous quarter, Morgan Stanley said. UBS Chief Executive Officer Oswald Gruebel said this week in a note to staff that it’s “imperative” the bank halt withdrawals. Net redemptions by wealthy clients at UBS accelerated in the third quarter, bringing the total to 182.9 billion francs over 18 months and undermining profit at the bank’s biggest division. “Although one-off effects such as tax amnesties are unavoidable, we ourselves must not give clients any reason to leave the bank,” Gruebel, 66, wrote in the memo, which was obtained by Bloomberg News. The wealth manager has posted six quarters of net outflows. Keeping Clients UBS advanced 0.2 percent to 16.57 francs by 11:24 a.m. in Swiss trading. The stock has gained 23 percent in the past year . Credit Suisse rose 0.8 percent to 54.7 francs, while Julius Baer advanced 0.3 percent to 38.07 francs. Italian clients don’t have to move their assets once declared. Private banks operating in Italy, including branches of Swiss banks, helped customers repatriate or declare assets worth 41.2 billion euros ($59.4 billion), including works of art, real estate and business holdings, the national association representing wealth managers said Dec. 17. Julius Baer retained about 60 percent of the clients who participated in the amnesty, CEO Boris Collardi told Swiss newspaper Sonntag last month, adding that he expects to win back as much as half of the lost assets. Morgan Stanley estimates that the Swiss banks retained as much as 65 percent of the declared assets in “onshore” accounts. Under the amnesty, which has been extended to April 30, Italians have declared 95 billion euros in assets, the country’s finance ministry said last month. To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

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Video: Schroeder Says Stricter Regulation Needed on Bank Risk

January 8, 2010

Jan. 8 (Bloomberg) — Karsten Schroeder, chief executive officer of Amplitude Capital LLP, talks with Bloomberg’s Rishaad Salamat about risk-taking by banks and the condition of credit markets.¶¶ Central bankers will hold talks with banking executives at the Bank for International Settlements in Switzerland this weekend amid concern financial companies are rebuffing a push to increase regulation and temper risk-taking as the financial crisis ebbs. Schroeder speaks in Zurich.

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London’s Investment Banks Double Pay to Lure Back Talent From Small Firms

January 8, 2010

By Sarah Jones and Ambereen Choudhury Jan. 8 (Bloomberg) — London’s investment banks are luring back traders and analysts they lost to small brokerage firms during the credit crisis, compensating for lower bonuses by as much as doubling base salaries. “The banks are killing the boutiques,” said Daryl Bowden , co-chief executive officer of ICAP Plc’s equities unit in Europe and Asia. The London-based firm is the world’s largest broker of trades between banks. “They’re doubling salaries and offering above-average compensation. Banks today have limited risk so people can work there without fear.” The benchmark U.K. FTSE 100 index’s 57 percent gain since March and an expected rebound in mergers is prompting firms from UBS AG to Barclays Plc to add traders and sweeten remuneration packages to win back employees. The U.K.’s 50 percent bonus tax won’t slow the flow of workers back to the banks because it’s only a one-time levy, recruiters said. The hires show how London’s investment banks are regrouping after boutique firms poached traders during the credit crisis with the promise of greater job security and a bonus. London’s investment banks cut about 49,000 jobs and logged more than $560 billion of writedowns during the credit crisis, according to data compiled by Bloomberg. Brokers including Eden Financial Ltd. and Liberum Capital Ltd. added sales traders and analysts to win clients from rivals that had received taxpayer bailouts. “We have begun to see a boomerang effect,” said Robert Iati , global head of consulting at research firm TABB Group in New York. “The larger banks are feeling a bit more secure in hiring back some of those traders from the smaller guys.” Citigroup, ICAP David Knight , who left Citigroup Inc. to join ICAP Equities in February 2008 as a sales trader, will join UBS this month to lead a team of salesmen catering to hedge funds. Ray Jarmyn and Jamie Playle , two sales traders, left Eden Financial to join UBS in October and Unicredit SpA in November. Steve Aspinall , who quit Lehman in 2008 to join Liberum Capital Ltd., a London-based broker that was founded in 2006, moved to Barclays Capital in August to become a sales trader. Andy Holmes left Shore Capital Ltd. in October 2009 to join Unicredit’s equity sales trading team in London. The traders weren’t available or declined to comment. Zurich-based UBS and Bank of America Corp. are the top equity traders in Europe by the volume of shares traded, according to a 2008 ranking by Greenwich Associates. Broking may generate $3.8 billion of fees in 2009, according to estimates from Tabb Group. Managing directors at large securities firms had their salaries doubled from about 150,000 pounds ($239,000) a year to 300,000 pounds on average in the past 12 months, according to recruiters. A managing director at a smaller brokerage firm is still earning 150,000 pounds in base pay. Salaries Increased In July, Citigroup doubled the salaries of most managing directors, a rank reserved for senior bankers and traders, to about $400,000. Barclays, Britain’s second-biggest lender, is also planning to raise investment bankers’ base salaries, a person familiar with the matter said on Dec. 3. Credit Suisse Group AG , Switzerland’s largest bank by market value, said in October it will raise salaries for senior employees. “I am seeing a move back,” said Jason Kennedy , chief executive officer of recruiter Kennedy Associates in London, who has been working in the industry for about 13 years. “The investment banks came back sooner than expected. When bonuses are a bit scarce, doubling the base salary is a big improvement. The brokers can’t compete.” London-based recruiters estimate that British Chancellor of the Exchequer Alistair Darling’s plan to impose a tax on bonuses will affect at least 40,000 people, twice the government’s estimate. The U.K. will impose a one-time charge of 50 percent on bonuses of more than 25,000 pounds, Darling told Parliament on Dec. 9. The tax will be paid by the banks, and employees will still have to pay income tax on their earnings. While bankers are considering their options on relocating to Germany or Switzerland to avoid the tax, Kennedy said the bonus levy isn’t an issue for traders and bankers looking to move after April to larger firms because the government has said the charge will apply only to this year’s bonuses. To contact the reporter on this story: Sarah Jones in London at o sjones35@bloomberg.net ; Ambereen Choudhury in London achoudhury@bloomberg.net ;

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Credit Suisse Reassigns Japan Electronics Analyst Tabata to Cover Autos

January 4, 2010

By Mariko Yasu and Shunichi Ozasa Jan. 5 (Bloomberg) — Credit Suisse Group AG reassigned its Japan electronics analyst to cover automakers as part of a reshuffling of its research staff, Kyoya Okazawa , the bank’s head of equities in the country, said in an interview. Koya Tabata , 36, will cover Japanese carmakers including Toyota Motor Corp. starting today after nine years analyzing electronics companies such as Sony Corp. and Panasonic Corp., Okazawa said. Hitoshi Hayakawa , the Zurich-based bank’s telecommunications analyst, will add consumer electronics to his coverage, he said. Tabata’s appointment highlights the need for expertise beyond traditional automotive-industry knowledge as carmakers increasingly rely on electronics when developing new models, Okazawa said. Automakers are teaming up with electronics companies or investing in their own research units to develop new technologies for motors and power cells to meet demand for electric vehicles. Credit Suisse, which has 25 analysts in Japan covering 320 companies, plans to further strengthen its research this year, Okazawa said. Credit Suisse, Switzerland’s biggest bank by market value, hired Kunihiko Shiohara , a former Goldman Sachs Group Inc. partner, to head the equity-research team last July. For Related News and Information: Bloomberg’s stories on Credit Suisse in Japan: To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net ; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net .

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Macquarie Will Acquire Sal. Oppenheim Equity Trading, Derivatives Business

December 23, 2009

By Aaron Kirchfeld Dec. 23 (Bloomberg) — Macquarie Group Ltd. , Australia’s biggest investment bank, agreed to buy Sal. Oppenheim Jr. & Cie.’s equity trading and derivatives unit, the company’s first acquisition in Germany. Macquarie will take on more than 90 German and Swiss-based employees from Sal. Oppenheim, with the transaction scheduled to be completed in the second quarter of next year, the banks said in separate statements today. The price for the derivatives business, which has operations on exchanges in Germany, Austria, Switzerland and Italy, wasn’t disclosed. Macquarie, based in Sydney, is making acquisitions to boost investment banking outside Australia, including the purchase of Fox-Pitt Kelton Cochran Caronia Waller LLC in September. Sal. Oppenheim sought to sell all or some of its investment bank after it was bought by Deutsche Bank AG in October for its wealth and asset management units. “Sal. Oppenheim’s successful derivatives and structured products business will give Macquarie access to a new range of products, a platform with state-of-the-art technology and top- class employees,” said Mark Gilbert , Macquarie’s head of derivatives business in Europe, the Middle East and Africa. A “solution” is being sought for Sal. Oppenheim’s remaining investment banking activities, which include about 300 employees and the takeover advisory business, the company said. Deutsche Bank has indicated that it will “fully support” a continuation of the investment bank and one option remains a sale of the business, Luxembourg-based Sal. Oppenheim said. Following regulatory approval and the completion of the transaction, the retail equity derivatives business will be called Macquarie Oppenheim, the Australian bank said. “This sale is a further step in restructuring Sal. Oppenheim,” said Wilhelm von Haller . Haller, a former Deutsche Bank director, was named head of Sal. Oppenheim yesterday after the executive board agreed to step down. Sal. Oppenheim, Germany’s largest private bank and family run for seven generations, put itself up for sale after reporting the first loss since World War II last year from soured investments. To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Sarasin Spurns Acquisitions in Asia `Beauty Contest’ for Private Bankers

December 23, 2009

By Joyce Koh Dec. 23 (Bloomberg) — Bank Sarasin & Cie. will forego acquisitions as it expands in Asia, its fastest-growing market, even as hiring gets more challenging as private banks compete for talent. Sarasin, the Swiss private bank controlled by Rabobank Groep NV, more than doubled the number of relationship managers in Asia to about 60 and tripled the assets managed for rich clients in the last two years, Enid Yip , Sarasin’s chief executive officer for the region, said in an interview. She declined to give a specific target for hiring next year. The Basel, Switzerland-based firm hired nine private bankers in Singapore from UBS AG in the past two months, stepping up efforts to win a bigger slice of fees from Asia’s richest people. The assets of millionaires in the Asia-Pacific region will exceed those of North America by 2013, Merrill Lynch and Capgemini said in a survey published in October. Rising demand for senior private bankers in the region means hiring them is “just like a beauty contest,” Yip said in an interview in Singapore on Dec. 18. “With these very top talents, everybody wants them. Next year, it’s going to be a very challenging year now that we have all the new players and they are very well positioned.” Oversea-Chinese Banking Corp., Singapore’s third-largest lender, in October agreed to acquire ING Groep NV’s private- banking assets in Asia for $1.46 billion in a transaction that will triple assets it manages for the wealthy. Heritage Branch Julius Baer Group AG this month said it expects Asia to become its biggest source of net fund inflows, and plans to set up a bank in Hong Kong. Smaller rival Geneva-based Banque Heritage opened its first Asian branch in Singapore this month and expects to triple its assets there to S$300 million ($212) next year. Net new money coming from private clients in the Middle East and Asia doubled to 1.8 billion Swiss francs ($1.7 billion) in the first half, according to Sarasin. Yip said she prefers to grow the Asian business without acquisitions because it allows her greater control over who joins the bank. “I’m not faced with a situation where I need to have 500 people in Asia by whenever, so I believe in organic growth,” she said. Yip joined Sarasin in 2007 after working at Credit Suisse since 1998. The private bank plans to open a representative office in Shanghai by the third quarter of next year, though the focus will be on its offices in Hong Kong and Singapore, Yip said. ‘Bench of Talent’ Sarasin this month hired Grace Barki from UBS as head of Southeast Asia, and appointed Febby Avianto, also from UBS, to run the Indonesian business at its Singapore subsidiary. The company hired seven more UBS employees for its Indonesia team last month, spokeswoman Renate Boerner said. UBS, with more than 2,000 wealth management staff in the region, has “a deep bench of talent and continues to have the largest and most experienced team in Asia-Pacific,” spokeswoman Julie Yeo said in an e-mailed response to questions. Staff turnover is below the industry average and UBS, Switzerland’s biggest bank, will continue to hire, she said. Sarasin’s Yip said there’s an opportunity to recruit clients and employees away from larger banks whose images were tarnished by the global financial crisis. “Our strategy will be focused on people” in 2010, she said. “With the crisis, there is a strong sentiment against some integrated banks. Big is no longer good because clients feel they are obliged to buy products from the bank’s other units.” Sustainable Investments Sarasin, which plans to become the first private bank to shift all of its Swiss clients to socially responsible investments, aims to introduce the same concept in Asia, Yip said. Assets managed according to sustainable principles rose 68 percent to 10.1 billion Swiss francs in the first half, Sarasin said in July. Yip said she hopes to eventually increase the portion of her clients’ holdings in so-called sustainable investments to about 20 percent of their assets from the current “embryonic” stage. “After the crisis, people have stepped back a bit and are more than happy to spend time with us and understand more about the concept of sustainability,” she said. To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

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Credit Suisse Names Sim Global Head of M&A in Shake-Up of Advisory Groups

December 21, 2009

By Ambereen Choudhury Dec. 21 (Bloomberg) — Credit Suisse Group AG , Switzerland’s biggest bank by market value, named Boon Sim global head of mergers and acquisitions in a shake-up of its teams advising U.S. and European companies on takeovers. Sim, 47, will be replaced as head of U.S. mergers by Andrew Lipsky , the bank said in an internal memo today. Giuseppe Monarchi will replace David Livingstone as head of European M&A. Livingstone, 46, will return to his native Australia as chief executive officer of Credit Suisse Australia. The contents of the document were confirmed by a Credit Suisse spokeswoman in London. The Zurich-based bank is filling a post left vacant after Marc Granetz , who was both head of M&A worldwide and co-head of the global investment banking department, was named to a new role working with clients in October. Sim will replace Granetz in his M&A duties. Luigi de Vecchi will replace Granetz as joint head of the investment bank with James Amine , the bank said in October. Credit Suisse is the ninth-ranked adviser on global M&A this year, down from eighth place in 2008, according to data compiled by Bloomberg. Advisory revenue fell 67 percent in the third quarter from the year-earlier period to 106 million Swiss francs ($102 million), the lowest since the start of 2005. Sim, who grew up in Singapore and is a former semiconductor designer, joined Credit Suisse predecessor First Boston Corp. in 1991. He advised Kohlberg Kravis Roberts & Co. on its $26 billion purchase of First Data Corp. in 2007 and Avaya Inc. on its $8.2 billion sale to TPG and Silver Lake, two U.S. private equity firms. Sim will report to Amine and de Vecchi . Amine, de Vecchi “This group will lead one of the bank’s most critical strategic advisory businesses,” Amine and de Vecchi wrote. Lipsky, a former lawyer at Paul Weiss Rifkind Wharton & Garrison, joined the CSFB in 1997 and is now head of its diversified industrials and services team. He advised Ingersoll Rand Co. on its $10 billion takeover of air-conditioner maker Trane Inc. last year. Livingstone will be replaced by Monarchi, co-head of European technology, media and telecommunications investment banking in London, according to the memo. He advised Italy’s Lottomatica SpA on its $4.7 billion purchase of U.S. gaming equipment maker Gtech Corp. in 2006. In Sydney, Livingstone will replace David Trude , who will continue to work with the bank as an adviser. Joe Gallagher will continue to run the bank’s Asia Pacific M&A team from Hong Kong. To contact the reporters on this story: Ambereen Choudhury in London achoudhury@bloomberg.net

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Credit Suisse Names Boon Sim Global Head of M&A; Monarchi to Lead Europe

December 21, 2009

By Ambereen Choudhury Dec. 21 (Bloomberg) — Credit Suisse Group AG , Switzerland’s biggest bank by market value, named Boon Sim global head of mergers and acquisitions in a shake-up of its teams advising U.S. and European companies on takeovers. Sim, 47, will be replaced as head of U.S. mergers by Andrew Lipsky , the bank said in an internal memo today. Giuseppe Monarchi will replace David Livingstone as head of European M&A. Livingstone, 46, will return to his native Australia as chief executive officer of Credit Suisse Australia. The contents of the document were confirmed by a Credit Suisse spokeswoman in London. The Zurich-based bank is changing the leaders of its merger advisory teams after Marc Granetz , who was head of M&A worldwide as well as co-head of the global investment banking department, was named the division’s chairman in October. He will take up that job at the end of this year. Credit Suisse is the ninth-ranked adviser on global M&A this year, down from eighth place in 2008, according to data compiled by Bloomberg. The Zurich-based bank’s share of the advisory market dropped to about 13 percent in 2009 from 17 percent in 2007, the data show. Advisory revenue fell 67 percent in the third quarter from the year-earlier period to 106 million Swiss francs ($102 million), the lowest since the start of 2005. Sim, who grew up in Singapore and is a former semiconductor designer, joined Credit Suisse predecessor First Boston Corp. in 1991. He will report to investment banking co-heads Jim Amine and Luigi de Vecchi . He advised Kohlberg Kravis Roberts & Co. on its $26 billion purchase of First Data Corp. in 2007 and Avaya Inc. on its $8.2 billion sale to TPG and Silver Lake, two U.S. private equity firms. Amine, de Vecchi “This group will lead one of the bank’s most critical strategic advisory businesses,” Amine and de Vecchi wrote. Livingstone will be replaced by Monarchi, co-head of European technology, media and telecommunications investment banking in London, according to the memo. He advised Italy’s Lottomatica SpA on its $4.7 billion purchase of U.S. gaming equipment maker Gtech Corp. in 2006. In Sydney, Livingstone will replace David Trude , who will continue to work with the bank as an adviser. Joe Gallagher will continue to run the bank’s Asia Pacific M&A team from Hong Kong. To contact the reporters on this story: Ambereen Choudhury in London achoudhury@bloomberg.net

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London Banker Exodus to Geneva Runs Into Housing Shortage, 44% Income Tax

December 20, 2009

Dec. 21 (Bloomberg) — Geneva, touted as a haven for London bankers facing heavier U.K. taxes, may lure fewer than predicted thanks to a housing shortage, crowded schools and a 44 percent income-tax rate. Barclays Plc President Robert Diamond this month joined a chorus of financial leaders in arguing that the U.K.’s 50 percent tax on bonuses would drive bankers away from London. The Swiss Private Bankers Association said the “arbitrary” tax will boost the allure of Geneva, whose bankers oversee about 10 percent of the world’s foreign-held private wealth. “It’s a joke, it’s lobbying,” said Tim Dawson , an analyst at Geneva-based brokerage Helvea AG . “People are dreaming if they think the London investment banking world is going to move. There is more office space in Canary Wharf than in the whole of Switzerland,” he said, referring to London’s second financial district. Chancellor of the Exchequer Alistair Darling said this month that banks awarding discretionary bonuses of more than 25,000 pounds would have to pay a one-time levy of 50 percent. That followed earlier decisions to boost the top tax rate to 50 percent and rescind special breaks for residents whose tax home is outside the country. That’s making the U.K. a “hostile environment” for wealthy people and many are considering relocating to rival financial centers, said Caroline Garnham, a partner at London- based law firm Lawrence Graham LLP who advises on tax planning. No ‘Huge Masses’ The numbers choosing Switzerland will be small, and banks with Swiss roots, such as Credit Suisse Group AG and UBS AG, will probably find it easiest to move workers, said Stefan Schuermann , an analyst at Zurich-based Vontobel Holding AG. “I don’t expect huge masses; there is going to be some inflow,” Schuermann said. “You don’t easily move just because of tax issues if you have a family.” Those keen to settle in Geneva, a city of less than 200,000 on the doorstep of ski resorts such as Verbier, Chamonix and Megeve, will face housing constraints. Just 92 detached houses were vacant throughout the canton, which includes suburbs and outlying villages, on June 1 as population growth outpaced expansion of the property market, according to figures from the canton’s statistic office. Geneva’s vacancy rate for all types of accommodation stood at 0.21 percent, compared with 0.66 percent in Zurich and 2.3 percent in London. ‘Pressure on Services’ The median price of a four-bedroom house in Geneva was 1.62 million Swiss francs ($1.57 million) in the third quarter. The average price of a property in Kensington and Chelsea, London’s most expensive borough, was 790,946 pounds ($1.28 million) in October, according to Land Registry data. “The pressure on services might become an issue,” said Glen Millar, a Geneva-based consultant at Kinetic Partners LLP, which says it is looking to relocate 15 hedge-fund firms to Switzerland from London after the U.K. announced a higher tax rate in April. “For that reason, arrivals may remain a trickle.” More than 65,000 people, known as frontaliers, commute into Geneva from neighboring France each day, according to cantonal figures, both for work and to pay less for housing. At the International School of Geneva , where fees can total 28,000 francs a year, applications for next September are almost double the number of likely vacancies, said admissions director John Douglas. The school, whose alumni include former Indian Prime Minister Indira Gandhi and retired U.S. Army General Norman Schwarzkopf , plans to add 600 places by 2012. “It’s increasingly difficult to get places,” Douglas said. “It’s not just tax but location and quality of life. Hedge funds are part of the picture.” Competing With Melting Pots And it isn’t just Geneva. Switzerland struggles to compete with the day-to-day attractions of London, a city whose population almost matches that of the whole country. Switzerland “cannot match the force of attraction and integration of international melting pots like New York or London for hiring talent from all over the world,” the Swiss Federal Council said in a Dec. 16 report outlining strategies required to keep the country’s financial centers competitive. While each Swiss canton sets its own tax rate, allowing local officials to negotiate individual tax deals with wealthy immigrants, those rules are coming under pressure. Zurich, Switzerland’s biggest city and the home of UBS and Credit Suisse, will abolish special tax privileges for foreign millionaires on Jan. 1. The canton’s top rate of income tax is 40.3 percent. “Some of the German-speaking cantons around Zurich are able to offer tax rates that never exceed 20 percent, but people don’t want to move there, they prefer the lifestyle around Geneva,” said Thierry Boitelle, a partner specializing in tax at law firm Altenburger . “From a tax point of view it doesn’t make sense to locate 100 people here.” Hedge Funds Altenburger advises clients to relocate only those functions that “add value,” while leaving back office and administration jobs in cheaper locations. With Swiss firms overseeing a quarter of the world’s offshore private wealth, it may make sense for private equity and hedge fund managers to move to Switzerland, said Millar at Kinetic. BlueCrest Capital Management Ltd., a London-based hedge fund firm that oversees about $15.4 billion, plans to open a Geneva office as increased taxes and regulation make London less attractive, a person familiar with the situation said last month. It follows Brevan Howard Asset Management LLP, Europe’s largest hedge fund manager, which said in September it may open an office in Switzerland. Finding a Way The country has added 10 to 20 single-manager hedge funds over the past two years, according to the Swiss Funds Association . Switzerland’s 136 hedge funds managed $17.3 billion at the end of June, compared with 828 overseeing $263.2 billion in the U.K., according to Eurohedge. “Limiting the income of investment managers, in addition to taxing them a lot, might encourage them to come to Switzerland,” said Frédérique Bensahel, a partner at the law firm FBT who advises hedge funds that have moved to Geneva. “It’s true that housing is extremely difficult and expensive and the schools are very full, but when you have a good project you will find a way.” Altenburger receives six to 10 relocation inquiries a month at its offices in Geneva and Zurich, with about two turning into actual moves, Boitelle said. “It’s not a wave but a steady stream,” he said. “If you’re coming from London, Geneva is a small village.” For Related News and Information: Bloomberg Funds & Holdings Home Page: FUND Most-read hedge fund news: MNI HEDGE Hedge Fund Rankings: WHF Top Fund News: TOP FUND

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Euro Rises as Pakistan Denies Report of Coup; Yen Gains on Exporter Demand

December 17, 2009

By Yasuhiko Seki and Yoshiaki Nohara Dec. 18 (Bloomberg) — The euro rose against the dollar, ending three days of losses, after Reuters reported that Pakistan denied a coup had taken place in the country, reviving demand for higher-yielding assets. The euro also gained before a German report forecast to show business confidence rose to the highest since July 2008. The yen strengthened on speculation Japanese exporters are repatriating profits before the year-end. The Bank of Japan held its benchmark rate at 0.1 percent, as forecast by economists. “We saw a typical case of rollercoaster-like moves revolving around developments in Pakistan,” said Kazutoshi Yasuda , general manager of the markets department in Tokyo at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp. “Sharp declines in trading volume before the Christmas holiday season amplified price fluctuations.” The euro rose to $1.4396 as of 1:54 p.m. in Tokyo from $1.4338 in New York yesterday after earlier falling as low as $1.4306. The euro rebounded to 128.64 yen from 129 yen, after earlier dropping to 127.54 yen, the weakest since Nov. 27. The yen rose to 89.35 per dollar from 89.96. The euro was at 1.4966 Swiss francs from 1.5020 yesterday after earlier touching 1.4909, the lowest since March 12. Sovereign Concern A Pakistani presidential spokesman denied a coup occurred after the defense minister was forbidden to leave the country, Reuters said. “There is no coup,” spokesman Farhatullah Babar was quoted as saying by Reuters. The euro reached the weakest in nine months against Switzerland’s currency and is poised for the longest stretch of weekly declines since March against the greenback. Standard & Poor’s this week cut Greece’s credit rating to BBB+ from A-and signaled it may lower the score again. Fitch Ratings downgraded Greece to BBB+ on Dec. 8, raising concern among investors that the worst global recession since World War II is still weighing down some economies. S&P yesterday cut long-term credit ratings for Greek banks EFG Eurobank Ergasias and Alpha Bank AE by one level to BBB, and put those ratings on “creditwatch negative,” signaling S&P may reduce them further. Greece’s Prime Minister George Papandreou said yesterday he’s determined to turn around the country’s economy and that a default is “simply out of the question.” Austria said on Dec. 14 that it was nationalizing Hypo Alpe-Adria Bank and injecting as much as 450 million euros ($649 million) into the lender. “Mounting wariness about credit woes in the euro-zone is triggering buying of the Swiss franc, which is also considered to be a safe-haven currency like the yen and the dollar,” said Yousuke Hosokawa , a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank. “How the Swiss National Bank will respond to today’s relatively sharp move remains to be seen.” Swiss Intervention Switzerland’s central bank said Dec. 10 it will soften its currency intervention policy and stop purchases of corporate bonds as it takes the first steps to withdraw emergency measures. The SNB said this month it will act to counter “any excessive” moves by the franc against the euro. The yen and dollar rose this week as investors retreated from higher-yielding assets. Ten-year Treasuries jumped yesterday by the most since October and the Standard & Poor’s 500 Index tumbled 1.2 percent. The MSCI Asia Pacific Index of regional shares dropped 0.6 percent today. In the past two weeks, ICE futures exchange’s Dollar Index rebounded 4 percent as signs of economic recovery prompted traders to speculate that U.S. policy makers would raise rates sooner than expected. Exporter Buying The gauge rose the most in two weeks yesterday, advancing as much as 1.2 percent to 77.94, the highest since Sept. 8. It was the biggest one-day gain since Dec. 4, when the Labor Department reported fewer-than-expected job losses. The yen rose against major counterparts on prospects Japan’s exporters are bringing home earnings. Large Japanese manufacturers expected the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released Dec. 14. “When the dollar climbs toward 90 yen, many Japanese exporters sell the dollar to repatriate profits,” said Tomokazu Matsufuji , a dealer at SBI Liquidity Market Co. in Tokyo, a unit of financier SBI Holdings Inc. Bank of Japan Governor Masaaki Shirakawa and his colleagues held the benchmark overnight lending rate at 0.1 percent by a unanimous vote, the central bank said in a statement today. All 19 economists surveyed by Bloomberg News predicted the decision. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net ; Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net

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Credit Suisse Will Pay $536 Million to Settle U.S. Payment-Processing Case

December 16, 2009

By Joshua Gallu, Karen Freifeld and Cary O’Reilly Dec. 16 (Bloomberg) — Credit Suisse AG agreed to pay $536 million to settle claims the bank helped process payments that let Iran and other nations avoid government sanctions and gain access to U.S. financial markets. The bank entered into a deferred prosecution agreement as part of the settlement with the U.S. Justice Department, a spokesman for U.S. District Court in Washington said today. The settlement, which included a local prosecutor and the Federal Reserve, relates to a previously disclosed probe of dollar payments from 2002 through April 2007, the bank said today in a statement. “This will be the biggest settlement ever coming to New York,” said Manhattan District Attorney Robert Morgenthau , who in January announced a $350 million agreement with Lloyds TSB Bank Plc for similar acts. “If you violate U.S. sanctions, you’re going to pay a big financial penalty,” he said in an interview yesterday. Morgenthau and U.S. Attorney General Eric Holder scheduled separate news conferences at 4 p.m. today to discuss the case. Credit Suisse, Lloyds and eight other foreign banks have been investigated for “stripping” wire transfer information to conceal illegal money transfers. Credit Suisse altered its dollar payments by removing Iranian names and references from payment messages, according to court documents. The bank used code words for sanctioned entities when executing trades involving U.S. securities and instructed Iranian customers on how to format dollar-denominated payments to evade detection. ‘Alterations, Code Words’ “Credit Suisse knew that without such alterations, amendments and code words, automated (U.S. Department of the Treasury’s Office of Foreign Assets Control) filters at U.S. clearing banks would likely halt the payment messages and securities transactions,” prosecutors said in charging documents. In the agreement, Credit Suisse admitted to “falsifying the records of New York financial institutions,” Morgenthau’s office said in a statement. The bank agreed to train employees who process dollar- denominated payments or securities-trading orders in carrying out United Nations, U.S. and European Union sanctions against Iran. Chief Executive Officer Brady Dougan has until June 30 to certify training is complete, according to the agreement. “Credit Suisse is committed to the highest standards of integrity and regulatory compliance in all its businesses, and takes this matter extremely seriously,” the bank said in the statement. The company “has enhanced its procedures to prevent practices of this type from occurring.” Funds Set Aside Credit Suisse, Switzerland’s biggest bank by market value, had set aside funds anticipating a settlement and may record a charge of 360 million francs ($346 million) in the fourth quarter, the company said. Lloyds used a similar stripping technique to disguise clients in Iran and Sudan who were barred from doing business in the U.S. Lloyds admitted that from 2001 to 2004 it let Iranian banks, including Bank Melli, Bank Saderat and Sepah Bank, and their customers move more than $300 million, the Manhattan District Attorney’s office said in January. Barclays Plc also was cooperating with the probe, according to its 2007 annual report. The London-based lender said results of its internal review are being shared with U.S. agencies. The report said it wasn’t possible to predict the potential effect of any resolution, which could be “substantial,” though wouldn’t have a “material adverse effect.” Kerrie Cohen , a Barclays Capital spokeswoman, declined to comment. ‘Sensitive Countries’ In 2005, Credit Suisse said it wouldn’t enter into any business with clients in “sensitive countries,” terminating relationships when possible and beginning “controlled withdrawal” while fulfilling contractual obligations. The bank terminated business with all parties sanctioned by the U.S. Office of Foreign Assets Control in 2006. As part of the investigation of the banks, prosecutors said they found evidence Iranian interests tried to buy tungsten and other materials used in the guidance systems of long-range missiles. Lloyds wasn’t the bank involved in those attempts, prosecutors said. U.S. laws bar the transfer of funds from Iran and other sanctioned countries without U.S. Treasury Department authorization. The investigation emerged from a probe of the suspicious movement of money by alleged Iranian front companies and charities, Morgenthau said in January. Morgenthau, who turned 90 in July, is retiring as Manhattan District Attorney this month after 34 years. He began as a prosecutor of white-collar crime in 1961, when President John F. Kennedy named him U.S. attorney in New York. He was elected district attorney in 1975. His father, Henry Jr., was Treasury secretary for President Franklin D. Roosevelt . The case is U.S. v. Credit Suisse AG, 09-cr-352, U.S. District Court, District of Columbia (Washington). To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net ; Karen Freifeld in New York State Supreme Court in Manhattan at kfreifeld@bloomberg.net ; Cary O’Reilly in Washington at caryoreilly@bloomberg.net .

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Gold Buying by Central Banks Sends Sell Signal as Past Haunts Future Price

December 15, 2009

By Claudia Carpenter and Pham-Duy Nguyen Dec. 16 (Bloomberg) — Some of the biggest buyers of gold may be sending the strongest signal to sell it, if past performance is indicative of future results. Central banks, holding about 18 percent of all gold ever mined, are expanding their reserves for the first time in a generation as a nine-year bull market drives prices to a record. The banks will buy 13.8 million ounces (429 metric tons) this year, worth $15.5 billion, for the first net expansion in reserves since 1988, New York-based researcher CPM Group estimates. Gold fell 15 percent that year and took another 15 years to trade again at the same price as central banks from Switzerland to the U.K. cut their holdings . India, China and Russia are now adding to reserves as gold nears its longest winning streak since at least 1948. They’re joining a rush as investors in exchange-traded funds amass holdings to rival the biggest central banks. Clive Capital LLC, manager of the biggest commodities hedge fund, had its best return since May last month, led by gains in precious metals. “This is late in the game to be buying gold,” said Peter Morici , a professor of business at the University of Maryland in College Park and former economic adviser to the U.S. government. “Central banks are not known for their investment acumen. What it reflects is a lack of confidence in the U.S. economy and the long-term durability of the dollar as a store of value.” Countries were also increasing their holdings in 1980 when gold peaked at $850 an ounce, data compiled by the London-based World Gold Council show. The record was exceeded 28 years later. 20-Year Low They sold a net 4,880 tons since 1999, as prices tumbled to a 20-year low of $251.95 an ounce, according to estimates from London-based researcher GFMS Ltd. Prices began to recover in 2001 and reached a record $1,226.56 on Dec. 3. This year’s 5.4 percent slump in the U.S. Dollar Index , a measure against six counterparts, is increasing the appetite for bullion. While gold and the dollar are traditional stores of value in times of economic stress, the U.S. currency proved no refuge as the Federal Reserve more than doubled its balance sheet to $2.19 trillion in 15 months. The dollar’s share of global currency reserves fell to a decade low of 62.8 percent in the second quarter, the International Monetary Fund said Sept. 30. India bought 200 tons from the IMF in October, the Washington-based lender said. It was the biggest single central- bank purchase in at least 30 years over such a short period, according to Timothy Green , author of “The Ages of Gold.” Russian Buying Bank Rossii, Russia’s central bank, said it added about 15.5 tons of gold in October. The Bank of Mauritius bought 2 tons and Sri Lanka 10 tons last month from the IMF, part of 403.3 tons of planned sales to raise money and lend at reduced rates to developing nations. “Gold is a good anchor and hedge to have in these volatile circumstances,” Sri Lanka’s Central Bank Governor Nivard Cabraal said in an interview in Singapore on Nov. 26. Gold has jumped 27 percent this year in dollars and yuan, 31 percent in rubles and 22 percent in euros as investors sought to diversify their holdings amid the worst global recession since World War II. Governments spent at least $12 trillion to lift their economies out of the slump. Kazakhstan, Venezuela and the Philippines will also add to their gold reserves this year, part of the first annual net purchases by central banks since Taiwan bought gold to diversify from dollars in 1988, according to Jeff Christian , managing director of CPM. ‘Managing Risk’ The buying is “part of managing risk by diversifying holdings,” Philippine central bank Deputy Governor Diwa Guinigundo wrote in a mobile phone text message Dec. 8. “With the dollar weakness, they think the next best solution is to go into gold.” China’s holdings rose 76 percent since 2003 to 1,054 tons, the Xinhua News Agency reported in April, citing Hu Xiaolian , head of the State Administration of Foreign Exchange. The nation may not find it “very necessary” to keep buying above $1,000 an ounce, Zhang Yuyan, an economist at the Chinese Academy of Social Sciences, said Nov. 5. The academy is a think tank under the State Council. “There’s an illusion in gold,” Lee Eung Baek , head of the Bank of Korea’s reserve-management department, said in an interview Dec. 7. South Korea holds 14.4 tons of gold, ranking it 56th in the world, behind Nigeria and Belarus. “We follow the big trend. Gold isn’t the trend,” Lee said. Governments, led by the U.S., Germany, Italy and France, hold about a combined 29,600 tons, according to data from the World Gold Council. Reserves expanded from 700 tons in 1870 to 38,000 tons in the 1960s, the data show. Changing Constitution Switzerland changed its constitution to allow gold sales of as much as 1,300 tons and the U.K. began its sales of about 400 tons in 1999. Switzerland’s 1,300 tons is worth about $47 billion today compared with about $12 billion in 1999. The U.K. chose to sell its gold, a stack almost as big as two London taxis, in 17 auctions that ended in March 2002, investing the proceeds in dollars, euros and yen. The highest price it got was $296.50 an ounce in the final auction. That’s 74 percent less than today. “We call it the Brown bottom,” said Ross Norman , referring to Gordon Brown , then the U.K. finance minister and now prime minister. “I think you could argue they are not good traders,” said Norman, a former gold trader and co-founder of London-based commodities information provider Fastmarkets Ltd. Central Bank Agreement Sales became such a weight on the market that 14 European central banks and the European Central Bank agreed to limit their disposals to 400 tons a year in September 1999. The accord was expanded to sales of 500 tons a year in 2004 and renewed again this year with a 400-ton cap. “If it had not been for the central bank agreement, gold would have gone to $200,” said Philip Klapwijk , executive chairman of GFMS. Central bank buying may support prices. The bull market of the 1970s, when gold rose from $35.17 at the end of 1969 to $512 by the end of 1979, was in part caused by central bank hoarding, according to Daniel Sacks , a money manager of the Investec Global Gold Fund at Investec Asset Management, which oversees about $47 billion. “Central banks recognize the economic crisis could linger,” said William O’Neill , a partner at Logic Advisors in Upper Saddle River, New Jersey, and former head of futures research for Merrill Lynch & Co. “Gold has assumed the front and center position as the alternative currency.” To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net ; Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Egypt Drives Christians Into Hiding Even as Muslims Hit Swiss Minaret Ban

December 15, 2009

By Daniel Williams Dec. 15 (Bloomberg) — On a side street in the far northeast Cairo suburb of Ain Shams, the door of a five-story former underwear factory is padlocked. This is, or was supposed to be, the St. Mary and Anba Abraam Coptic Christian Church. Police closed it Nov. 24, 2008, when Muslims rioted against its consecration. Since then local Copts have had to commute to distant churches or worship in hiding at each other’s homes. While Muslim leaders criticized the Nov. 29 vote in Switzerland that banned construction of minarets, they don’t support Christians who want to build churches in some Islamic countries. Restrictions in Egypt have exacerbated sectarian violence and discrimination, say Copts, a 2,000 year old denomination that comprises about 10 percent of the population. The day after the Swiss vote, Ali Gomaa , one of Egypt’s top Muslim clerics, called the decision “an attempt to insult the feelings of the Muslim community in and outside of Switzerland.” Copts quickly said that neither Gomaa nor any other Islamic leader mentioned the Christian situation in Egypt. “Without the merest attempt to put our house in order, are we in any position to taunt others to put theirs?” Youssef Sidhom, editor-in-chief of the Cairo-based Egyptian Coptic weekly newspaper El-Watani, said in a telephone interview. “They should be ashamed.” The contrast between criticism of the Swiss and silence about local parallels isn’t limited to Egypt. Censure of Switzerland, where about 5 percent of the population is Muslim, was widespread in Islamic countries where Christians face restrictions on practicing their faith. ‘Xenophobic, Prejudiced’ “The decision of the Swiss people stood to be interpreted as xenophobic, prejudiced, discriminative and against the universal human-rights values,” said the Organization of the Islamic Conference in Jeddah, Saudi Arabia, which represents 57 Muslim-majority nations. Members include Saudi Arabia, where non-Muslims are arrested for worshipping privately; Maldives, the Indian Ocean atoll where citizenship is reserved for Muslims; Libya, which limits churches to one per denomination in cities; and Iran, where conversion from Islam is punished by death, according to a 2009 U.S. State Department report on religious freedom . “The Copts are a minority. Why do they need more churches?” Ain Shams café owner Harbi Muhammed Ali said in an interview. “There are other churches around. If you have one car, do you need two?” Human Rights As for Switzerland, “the West is always preaching human rights,” he said. “It’s their problem.” Requests for interviews with government officials and state-controlled Al-Azhar University in Cairo, Egypt’s largest institution of Islamic learning, went unanswered. Requests for interviews at the Islamic conference’s Geneva office, which issued the criticism of the Swiss ban, were rejected because officials were too busy, said a person who answered the phone there. Local officials oversee permits for church construction and renovation, which must receive endorsement from Muslims in the neighborhood and final approval from President Hosni Mubarak . “Church and human-rights leaders complain that many local officials intentionally delay the permit process,” the State Department report said. “As a result, congregations have experienced lengthy delays, years in many cases, while waiting for new building permits.” Throwing Stones Ain Shams is a sprawling district of narrow lanes and multistory housing with a majority Muslim population. The rioting there began after Copts renovated the factory and held mass, Muslim and Christian residents said. Rioters carried a banner that read “No to the church,” chanted “There is no god but God” and threw stones at police who kept them at bay. Only a wrought-iron cross design on the locked front door marks the place as a church. Just down the street, Muslim residents constructed a lime green Mosque of Light at the same time the Copts were modifying their building. “Of course, they closed us down, but the mosque is open,” said Hossama Sedik, 30, a Coptic day laborer. There are about 40 Coptic churches in Egyptian cities and scores more in towns and villages, especially in south Egypt , along with larger numbers of clandestine prayer houses, said Bishop Thomas, a Coptic priest who operates a retreat outside Cairo. Raise the Steeple In October, Muslims hurled stones at Christian workers in Al-Badraman, a village south of the city, because they were going to raise the steeple and add a bell at a church, according to press reports . In 2007, riots erupted in Behma, another southern village, after word spread that Copts were going to build a church without a permit. About 27 Christian-owned houses and shops were torched. Parallel to these incidents are clashes over such issues as conversion and alleged harassment of Muslim girls by Copts and Coptic girls by Muslims. ”It’s a challenge to hold onto the concept of love and peace,” said Thomas, 52. After he founded his retreat 10 years ago, Muslims set up four small mosques, complete with minarets — towers from which Muslims are called to prayer, just outside the four corners of the rectangular enclosure. “They make a point that if we are here, the Muslims must be, too,” he said. Even so, he joined Muslims in denouncing the Swiss ban. “If I want freedom to build in Egypt, I must also want it in Switzerland,” he said. To contact the reporter on this story: Daniel Williams in Abu Fana, Egypt, at dwilliams41@bloomberg.net

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Roche, Immunogen `Guided Missile’ Destroys Cells to Shrink Breast Tumors

December 12, 2009

By Rob Waters Dec. 12 (Bloomberg) — A “guided missile” combination drug called T-DM1 developed by Roche Holding AG and Immunogen Inc. shrank the tumors of one-third of the critically ill, advanced breast cancer patients in a study. The therapy combines Roche’s Herceptin with a potent cancer-killing drug developed by Immunogen. Herceptin acts as a guidance system, using its ability to home in on cancer cells to deliver the cancer treatment directly to its target, said Ian Krop of the Dana-Farber Cancer Institute in Boston. The “T” in the name is trastuzumab, the chemical term for Herceptin. T-DM1 would be the first product marketed by Waltham, Massachusetts-based Immunogen in its 28-year history. The two companies may seek regulatory approval next year, said Barbara Klencke, associate group director for clinical oncology at Genentech, the Roche unit that co-developed the drug. Herceptin generated $4.7 billion in sales last year. The combination product is “an extremely big deal for Immunogen because it validates and proves their technology,” said Jason Kantor , an analyst for RBC Capital Markets in San Francisco, in a Dec. 9 note to investors. “For Roche it’s important because it is a highly innovative follow-on product to one of their most successful franchises, and is the first of many drug conjugates Genentech has in development.” ‘Replace Herceptin’ The new therapy “has the potential to replace Herceptin” alone for patients whose breast cancer has spread and could also find use in treating gastric tumors, Kantor said. He predicted the drug could reach the market by the end of 2010. Partial results from the trial, released by Immunogen in a Dec. 9 regulatory filing, boosted Immunogen 8.9 percent to $8.89 in Nasdaq stock market trading that day. They closed yesterday at $8.77. The biotechnology company’s shares have more than doubled this year. Roche, based in Basel, Switzerland, fell less than 1 percent to 168.5 Swiss francs in Zurich trading. Immunogen, founded in 1981, has “had a few false starts” in past drug development efforts, said Chief Executive Officer Dan Junius in a telephone interview yesterday. The company has an accumulated deficit of $328 million over its 28-year history. Immunogen will earn a “mid-single digit” percentage off the sales of T-DM1 and has received $13 million of a possible $44 million in milestone payments from Roche, Junius said. Immunogen Technology Immunogen developed the technology for linking drugs and antibodies like Herceptin and is testing T-DM1 and other combinations in different cancers with Roche and other companies, Junius said. The study tested the drug in 110 women who’d had breast tumors for three years and whose cancer had moved outside their breasts. They had been treated with an average of seven different therapies including Herceptin, GlaxoSmithKline’s Tykerb and Roche’s Xeloda in an effort to stop or slow the cancer. Each intervention had failed. The DM1 drug added to Herceptin was derived from an old chemotherapy drug called maytansine that was found to be too toxic for patients in clinical trials two decades ago, said Krop, the study leader. Because Herceptin homes on the cancer cells that express the protein HER2, it delivers and releases DM1 only to those cells. “The warhead is the DM1,” said Krop, the study author, in an interview at the San Antonio symposium, where he presented his findings. “This approach gets the cytoxic drug to the cancer cells so it’s not floating around and causing other problems. Herceptin can still do all the things that Herceptin does” to prevent cancer cells from growing. Tumors Shrank In one-third of the women, their tumors shrank by 30 percent or more. Another 12 percent had stable disease for at least six months though their tumors didn’t shrink by at least 30 percent. The women went an average of 7.3 months without their condition worsening and had minimal side effects beyond those already seen with chemotherapy, Krop said. The drug is being tested in larger trials comparing it against other anti-cancer drugs for patients with earlier-stage breast cancer, Krop said. To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net .

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Japan Mask Wearing, Tamiflu Rush Beat Swine Flu Better Than U.S., Europe

December 10, 2009

By Kanoko Matsuyama and Jason Gale Dec. 11 (Bloomberg) — Eight hours after Tokyo office worker Shungo Yamamoto started feeling feverish and faint, he got a diagnosis of swine flu, received antiviral drugs and embarked on three days of self-imposed isolation last month. “I knew it was influenza immediately” because of the fever and joint pain, Yamamoto, 25, said. His doctor confirmed the diagnosis with a nose swab test and prescribed five days of Roche Holding AG’s antiviral drug Tamiflu. When he left the doctor’s office, Yamamoto put on a mask, bought a three-day supply of food, rented DVDs and headed home, where he stayed for the duration of his illness. Japan’s aggressiveness against H1N1 influenza, the result of hygiene standards, social etiquette and a willingness to test and medicate immediately, means the country has fared better than the U.S. or the U.K. in battling the first pandemic in 41 years. A World Health Organization report shows Japan’s mortality rate is 2 deaths for every 100,000 people. The rate is higher by 11 times in the U.K., 16 times in the U.S. and 43 times in Australia. “No doctor in Japan would tell a flu patient just to go home and sleep it off,” said Norio Sugaya , a pediatric specialist at Keiyu Hospital in Yokohama, a port city south of Tokyo. Sugaya sits on a committee that advises WHO, a Geneva- based arm of the United Nations, on managing swine flu patients. In the U.K., a study this month found patients typically waited three days to start taking Tamiflu, one of two medicines available to fight the new virus as well as seasonal influenza. Complication Risk The U.S. Centers for Disease Control and Prevention , based in Atlanta, recommends that antiflu drugs be given to hospitalized patients, pregnant women and others with increased risk of complications. In Japan, doctors are advised to administer the medicines to anyone suspected of having flu, even if a rapid diagnostic test is negative, according to the Japanese Association for Infectious Diseases , a Tokyo-based organization of specialist doctors that provides treatment recommendations. Japan accounted for three-quarters of the Tamiflu dispensed globally in the drug’s first five years of sale, Roche, based in Basel, Switzerland, said in a November 2005 filing to the U.S. Food and Drug Administration. Three years later, Japan’s government announced plans to stockpile enough antiflu medicines for 45 percent of its 128 million people. That may be triple the amount required to treat every swine flu patient. The proportion of people sickened by the pandemic virus ranges from 7 percent to 15 percent, depending on the country, according to WHO. Japanese Practices Japan’s status as one of the biggest users of antiviral medicines and its approach to treating seasonal and pandemic flu should be compared with practices elsewhere and the data should be published in English, said Lance Jennings , a clinical virologist with Canterbury Health Laboratories in Christchurch, New Zealand, who has studied flu for more than 30 years. “If you have better capacity to diagnose cases earlier and are treating appropriately and early, you’re more likely to reduce the number of patients who will go on to develop more- severe influenza,” Jennings said in an interview. While the majority of pandemic flu sufferers got over their illness within days without treatment, 1 percent to 10 percent needed hospitalization and as many as a quarter of those patients required intensive care, WHO said on Dec. 4 . Early Treatment Tamiflu and Relenza, an inhaled medicine made by London- based GlaxoSmithKline Plc , appear beneficial in fighting the H1N1 virus, especially if treatment begins within 48 hours of the onset of symptoms, researchers said in a study in the New England Journal of Medicine in November. A paper in the same journal in December reported reduced complications, including deaths, among hospitalized patients treated with the medications. A survey of Japanese patients in 2005 found 85 percent sought medical treatment for flu and 90 percent of consultations took place within 48 hours after the first symptoms appeared, according to David Reddy , who heads Roche’s influenza task force in Basel. “These people do not wait until it’s too late,” Reddy said in a telephone interview. “Japan has to be the gold standard of management of influenza. It’s almost a societal response in terms of the way people modify their behavior.” Japanese have become accustomed during the past decade to wearing masks in public to ward off allergic reactions to pollen from cedar trees throughout the country, said Masataka Yoshikawa , a researcher who tracks consumer behavior at Hakuhodo Institute of Life and Living, the research arm of a Tokyo-based advertising company. Japanese expect someone with a cold or flu to wear a mask to limit the spread of the virus, he said. Wash and Gargle “Hand-washing, gargling and wearing masks are three hygiene measures that are very well accepted in the community in Japan,” said Nikki Shindo , the Japanese doctor who is leading WHO’s investigation of swine flu patients. “People don’t really hesitate to wear masks in public places. Even the 24/7 convenience stores sell high-particulate respirators at a reasonable price.” Some researchers say they are skeptical that Tamiflu is effective and concerned that the virus will develop resistance to the drug because of misuse. An analysis of 20 studies published in the British Medical Journal on Dec. 8 showed Tamiflu offered mild benefits for healthy adults and found no proof it prevented lower respiratory tract infections or complications of flu. There is little evidence to show that otherwise healthy people should be given Tamiflu routinely, the researchers said. ‘No Doubt’ “Based on our analysis and other subsequent work, there is no doubt that the drug can reduce complications,” said Frederick Hayden , a professor of clinical virology at the University of Virginia School of Medicine in Charlottesville, who was one of the first doctors to study Tamiflu in patients. Missing doses or failing to complete a course of medicine increases the risk that a drug-evading strain will emerge, said William Aldis , an assistant professor of global health at Thammasat University in Bangkok and a former WHO representative to Thailand. In societies such as Japan, where treatment compliance is high, patients are less likely to contribute to drug resistance, he said. “So this is one more reason to think carefully before applying Japan’s approach elsewhere,” Aldis said. Japan, whose flu season typically peaks between January and March, may face more deaths from H1N1 if the infection trend follows that of seasonal flu, said Hitoshi Oshitani , a virology professor at Tohoku University in Sendai, in northern Japan. “Japan will enter its regular peak flu season from now, and we have to observe whether the pattern continues or not,” he said. Oshitani, who advises WHO on pandemic strategies for developing nations, also credits the country’s school-closure program for helping battle swine flu. To contact the reporters on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net ; Jason Gale at j.gale@bloomberg.net .

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Hildebrand Sets Sights on `Sacred Cows’ of Swiss Banking as SNB Job Looms

December 9, 2009

By Simone Meier and Klaus Wille Dec. 9 (Bloomberg) — Philipp Hildebrand , hedge fund manager turned central banker, is setting his sights on the dangers posed by UBS AG and Credit Suisse Group AG to the Swiss economy. Hildebrand, who takes the helm of the Swiss National Bank next month, is pushing what he calls a “no-more-taboos” stance after decades in which Switzerland’s banks were treated more with reverence than regulation. A year after the financial crisis forced a government bailout of UBS, the 46-year-old is signaling a willingness to be tougher than foreign counterparts and that he may go as far as to break up a bank if needed. “He doesn’t respect any sacred cows,” said Janwillem Acket , chief economist at Julius Baer Holding AG in Zurich, who has known Hildebrand since the 1990s. “His chances of succeeding are very good and should be taken even more seriously as SNB president. He’s got the ideal background, a strong personality and an excellent network.” Credit Suisse and UBS have assets six times the size of the economy, a source of unease for a country that relies on the perception of stability to attract wealthy investors. While banks have indicated they’ll fight any laws putting them at a disadvantage, Hildebrand has said that the size of the Swiss financial sector doesn’t only call for faster but also stricter rules in the Alpine nation. “We must accept that not all countries are confronted with the same urgency for reform as Switzerland,” Hildebrand said on Nov. 18. “Agreeing on an international common denominator of regulatory reform may turn out to be insufficient for the Swiss case.” Policy Meeting The SNB, which tomorrow holds its last policy meeting under President Jean-Pierre Roth before Hildebrand takes over on Jan. 1, will probably keep its key rate at 0.25 percent, according to all 16 economists in a Bloomberg News survey. The bank will release its decision at 9:30 a.m. in Zurich. Hildebrand, who previously worked for hedge fund company Moore Capital Management, also faces the challenge of withdrawing unprecedented stimulus measures without derailing an economic recovery from the worst slump in over thirty years or stoking inflation. As the economy recovers, the SNB may phase out its purchases of foreign currencies aimed to keep the franc from appreciating. “They’ll maintain their pragmatic stance,” said Alexander Krueger , head of capital-market analysis at Bankhaus Lampe KG in Dusseldorf, Germany. “They’ll wait and monitor economic developments while keeping an eye on the franc.” Outspoken Hildebrand, a former national swimming champion, has already used his authority to toughen regulation at home. In the weeks following the collapse of Lehman Brothers Holdings Inc. in September 2008, he helped avert a near collapse of UBS and forced the country’s two largest banks to raise capital buffers. The central bank and the financial-market regulator work jointly on banking stability. As the crisis unfolded, Hildebrand has become the most outspoken advocate of more robust regulation to prevent a further crisis, stressing concerns about banks that are “too big to fail.” Still, regulators have yet to tackle this issue and Credit Suisse and UBS have voiced resistance. “The solution can only be a global one” and national approaches “are prone to have negative influences,” UBS Chief Executive Officer Oswald Gruebel said on Nov. 17. Hans-Ulrich Meister , head of Credit Suisse’s Swiss business, said two weeks later that regulators must “slow down” as other countries are just paying “lip service” to regulation. ‘Tooth and Nail’ “The drastic suggestions, such as for example the possible splitting up” of banks “will meet strong resistance,” said Manuel Ammann , a professor of finance at the University of St. Gallen. “They will fight against it tooth and nail.” Born in Bern, Switzerland, Hildebrand went to school in Zurich and studied in Toronto before getting a doctorate from the University of Oxford in 1994. He narrowly missed qualifying for the Swiss Olympic swimming team in 1984. “He was a real workhorse,” said Anthony Ulrich, Hildebrand’s former swimming coach. “We used to have training sessions at 6 a.m. and then again in the evening.” Even though he often went back to work after late training, “he never failed to show up the next day.” As a student, Hildebrand worked as an assistant to executives and policy makers at the World Economic Forum annual conference in Davos, Switzerland, where he is now a regular attendee. He joined Moore Capital in 1995, where he was first in charge of strategy for Europe and fixed income before being made partner in 1997. He was appointed chief investment officer at Vontobel Holding AG in Zurich in 2000 and joined Union Bancaire Privee the following year, where he led the investment strategy. “UBS and Credit Suisse would probably prefer to have Hildebrand on their own executive floor rather than at the head of the SNB,” says Hans Geiger , Professor Emeritus of Banking at the University of Zurich. “It would make their life a whole lot easier.” To contact the reporters on this story: Simone Meier in Zurich at smeier@bloomberg.net ; Klaus Wille in Zurich at kwille@bloomberg.net .

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Minaret Threat Eclipsed by Swiss Intolerance: Celestine Bohlen

December 7, 2009

Commentary by Celestine Bohlen Dec. 8 (Bloomberg) — If it did nothing else (and it may end up getting knocked down in a European Court of Human Rights), Switzerland’s vote to ban the building of minarets drew attention to Europe’s identity crisis. The Swiss — like the French, or the Germans, or the British for that matter — are clearly worried about the Muslims living among them. Worry is one thing. It can be irrational, yet understandable. When people stoke those worries and turn them into fear, intolerance follows, and that is unacceptable. The Swiss vote has succeeded in shifting focus away from the social and economic problems of immigration, and toward religion. Putting the full weight of Europe’s cultural identity crisis on a slender piece of traditional architecture was both disingenuous and dangerous. Worse, it seems to be catching. Previous debates about the role of Islam in Europe involved issues other than religion. The 2004 French ban on head scarves in schools was about the submission of women; the 2005 publication of Danish cartoons lampooning the Prophet Muhammad was about free speech. A minaret, by contrast, is no more and no less than a symbol. Other religious symbols draw protest — a nativity scene in front of City Hall, say, or a cross on a mountaintop — but they, unlike the minaret, are not part of a house of worship. Yet the minaret is being outlawed in the heart of Europe — to scattered applause in neighboring countries. Four Minarets Somehow, an obscure referendum about Islamic architecture in a country of 7.8 million with just four minarets and 400,000 Muslims struck a nerve across Europe. That’s especially true in France, where politicians had been trying to manage a debate over “national identity,” and keep religion out of it. Now the cat is out of the bag. “It is a completely irrational issue, because a minaret can’t harm anyone, but it’s very rational politically, because it sells well for a certain electorate,” said Francois Heisbourg , director of the Foundation of Strategic Studies, a Paris-based research institute. Suddenly, people are expressing views that they once would have considered racist or intolerant. In a survey taken the day after the Swiss vote by Paris-based polling agency Ifop, 41 percent of French people questioned said they opposed the construction of mosques, up from 22 percent in 2001. On the question of building minarets, 46 percent were opposed. Zero-Sum Game There are an estimated 20 million Muslims among the European Union’s 500 million people, some of them native (mainly in the Balkans), many of them already second- or even third- generation in France, the U.K., and Germany. Denmark, Sweden and the Netherlands, among others, have accepted more recent arrivals. Islam is now Europe’s second-biggest religion. One source of the fear of Muslims — a theme that keeps coming up in print and in conversation — is Europeans’ deep and complicated resentment of an unfamiliar, historically hostile religion that is perceived as a direct challenge to Christianity, Europe’s dominant faith. In this view, disputed by church leaders, the contest becomes a kind of atavistic zero-sum game. Why else would leaders from Italy’s xenophobic Northern League party propose to put a crucifix on the Italian flag? There are other explanations for the widespread unease with Islam: its association with jihad and terrorism; the demands by Muslims for special treatment, such as segregation by gender at public swimming pools; persistent illegal practices like polygamy; and a sense that some Muslims ignore, even repudiate, values that are at the core of European civilization, such as free speech and the separation of church and state. Moderate Imams None of these issues has anything to do with minarets, which are generally built alongside Europe’s large urban mosques, where the imams are usually moderate establishment figures. Those imams who preach jihad don’t do it from minarets; they are laying low in store-front mosques, often on the run from the police. There are reasons to be concerned about Europe’s ability to integrate its Muslim citizens. But the subject is too important to be guided by religious stereotypes. The riots in France’s suburban ghettoes in 2005 were a testament to the failure of social policies, not to a resurgent Islam. Issues like minarets or the burqa — the ominous-looking head-to-toe garment, worn by a small number of Muslim women, that is being targeted by French President Nicolas Sarkozy — are beside the point. As an editorial in Le Monde said last week, the burqa, however offensive it may be to a woman’s dignity, is hardly a threat to secularism, the keystone of the French republic. According to a weirdly precise report by a French domestic intelligence agency, it is worn today by exactly 367 French women. Fear-Fueled Vote It is worth noting that the Swiss referendum against minarets was supported mostly by rural voters, whose fear of Islamic aggression comes more from ignorance than experience: it’s a safe bet that many have never seen a minaret, except on alarmist campaign posters where they are depicted as comic-book missiles. There is no excuse for stigmatizing any religion. That goes against the very values of tolerance Europe claims to stand for. It also marks a discouraging setback for the further integration of Muslim citizens, which has to be the goal of every European country. There is no other choice. ( Celestine Bohlen is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Celestine Bohlen in Paris at cbohlen1@bloomberg.net

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Nomura Sells First Benchmark Bonds in Euros in Bid to Diversify Funding

December 4, 2009

By Bryan Keogh and Caroline Hyde Dec. 4 (Bloomberg) — Nomura Holdings Inc. sold 1 billion euros ($1.5 billion) of bonds in what Japan’s biggest brokerage described as its debut international benchmark offering, as it seeks to diversify its funding. Nomura doubled the size of the sale from what was earlier planned and paid 250 basis points more than the mid-swap rate, said Carlo Pellerani , the Tokyo-based bank’s international treasurer. The sale is the first of many Nomura plans to make in euros, pounds and dollars as it more closely matches its financing sources to where it earns revenue, about half of which comes from outside of Japan, he said in an interview. “This is just the first of a process,” Pellerani said. “The objective here is to establish a liquid curve in all the major international currencies.” Nomura and Credit Suisse Group AG led 11.5 billion euros of corporate bond issuance this week, down from 20.9 billion euros a week earlier, according to data compiled by Bloomberg. About three quarters of issuance was raised on Dec. 2 and Dec. 3 after concern Dubai World would default on debt eased, as the state- run bank said it started talks to restructure $26 billion of borrowing. All but eight issuers this week were banks and other financial companies. Credit Suisse, Switzerland’s largest bank, raised 1.75 billion euros this week in its biggest bond offering in the market since July 30, Bloomberg data show. The Zurich-based bank offered three-year notes that float 60 basis points more than Euribor. A basis point is 0.01 percentage point. Yields Narrow Yields on investment-grade corporate bonds narrowed 3 basis points relative to benchmarks this week to 171, after climbing 5 basis points in the previous period because of concern over Dubai World, according to Merrill Lynch & Co. index data. Spreads tightened from a record-high 463 basis points in March. Borrowing costs remained near the lowest since March 2006, with investors demanding an average yield of 3.9 percent, Merrill data show. “With issuance still strong this week, including financials and even unrated bonds coming to the market, it is evident that the market is past the volatility of major contagion concerns from Dubai,” said Rajeev Shah , a credit strategist at BNP Paribas SA in London. Company bond issuance slowed after Dubai said on Nov. 25 that Dubai World, with $59 billion of liabilities, may delay interest payments, sending global stocks to their worst two-day decline in a month. While Dubai’s debt problems raised questions for Nomura on timing the deal this week, they “ended up being a non-issue,” Pellerani said. ‘New Name’ “Nomura is pretty much a new name to the market,” he said. “Hence it’s kind of a testament that perhaps what happened over Dubai, people are moving on from it.” Sales of high-yield bonds in Europe rose to 550 million euros from 380 million euros last week, Bloomberg data show. The securities are rated below Baa3 by Moody’s Investors Service and BBB- at Standard & Poor’s. Piaggio & C. SpA, the Italian scooter-maker, and food- processing company Agrokor sold high-yield, high-risk bonds, both offering seven-year notes. Piaggio, based in Pontedera, Italy, sold 150 million euros of 7 percent securities that priced at par, while Zagreb, Croatia-based Agrokor raised 400 million in an offering of 10 percent debt that priced to yield 10.625 percent, Bloomberg data show. To contact the reporter on this story: Bryan Keogh in London at bkeogh4@bloomberg.net ; Caroline Hyde in London chyde3@bloomberg.net .

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Franc Chosen Currency as Switzerland Emulates Australia Outperforming G-10

November 30, 2009

By Matthew Brown and Chris Fournier Nov. 30 (Bloomberg) — Switzerland, a nation of 7.8 million embroiled in the Bernard Madoff ponzi scheme scandal and tax- evasion disputes with the U.S., is gaining favor among foreign- exchange traders drawn to its outperforming economy. The number of wagers on a gain in the franc against the dollar exceeded bets on a decline by 10 times this month, data from the Commodity Futures Trading Commission showed. That’s the widest gap since the fourth-quarter of 2004, when the currency was rallying 9.3 percent versus the greenback. Underscoring their optimism, traders drove the franc to parity with the dollar last week for the first time since April 2008. Switzerland suffered the shallowest recession among the Group of 10 industrialized nations, as measured by Bloomberg data. Its performance lagged behind only Australia, the sole G- 10 member to avoid recession. The Swiss economy is forecast to shrink less than half as much as the euro region this year, 1.9 percent compared with 4 percent, the Organization for Economic Cooperation and Development said Nov. 19, aided by an expanding current-account surplus — the broadest measure of trade. “There’s very substantial underlying demand for Swissie, generated by one of the developed world’s largest current- account surpluses,” said Paul Meggyesi , a currency strategist in London at JPMorgan Chase & Co., which turned bullish on the franc Nov. 24. “I fail to see the economic emergency which will motivate the SNB to continue to offset that pressure with very substantial foreign-exchange purchases.” Reducing Sales Rising interest rates will lead the Swiss National Bank, or SNB, to reduce its sales of the franc, according to UBS AG and Credit Suisse Group AG, Switzerland’s biggest lenders. SNB President Jean-Pierre Roth said last week central banks may end stimulus measures “soon.” Switzerland, known for its banking secrecy laws, has had to contend with its role in the Madoff losses and a growing international backlash over its work with wealthy clients to avoid taxes. France’s market regulator, Autorite des Marches Financiers President Jean- Pierre Jouyet, said in June that UBS, a custodian bank to funds that entrusted money with Madoff, ought to reimburse investors in the funds for their losses. In August the U.S. and Switzerland settled a Justice Department lawsuit against UBS seeking the names of Americans suspected of evading taxes through 52,000 secret Swiss accounts. Weakening Franc The franc weakened on Nov. 26 as the SNB sold the currency, traders said, after reaching the strongest level in five months against the euro and climbing to parity with the dollar for the first time in 19 months the day before. It fell 0.13 percent as of 12:06 p.m. in Tokyo to 1.5089 against the euro, and rose 0.4 percent to 1.0019 versus the dollar. Werner Abegg , a spokesman in Zurich for the central bank, declined to comment. The SNB hasn’t discussed currency movements since it announced the initial intervention in March. Switzerland is the third-biggest center for currency trading after the U.K. and U.S., according to the Bank for International Settlements in Basel, Switzerland. Traditionally used as a funding currency for investors seeking higher yields, or as a haven during times of economic turmoil, the franc is now attracting investors betting the SNB will slow intervention that kept it little changed versus the euro since March. Central banks intervene by purchasing or selling currencies to influence exchange rates. Roth Departs “The impression is widely shared that the framework of measures put in place during the crisis will have to be corrected soon,” Roth, who is being succeeded by Philipp Hildebrand in January, said in Geneva on Nov. 24, without referring specifically to Switzerland. Roth reiterated in an interview with Neue Zuercher Zeitung published two days ago that the central bank will stick to its policy on the franc. The Federal Reserve repeated a commitment this month to keep its target interest rate for overnight loans between banks “exceptionally low” for an “extended period.” “The outlook is positive for the Swiss franc,” said John Praveen , the chief investment strategist in Newark, New Jersey, at Prudential International Investments LLC, a unit of Prudential Financial, which manages about $641 billion. “The SNB might be one of the first central banks to start neutralizing interest rates. That should lead to appreciation against the dollar and the euro.” Four Times When the central bank announced its first intervention on March 12, policy makers said they were concerned about deflation, or a general decline in consumer prices. Prices fell month-to- month only twice since then, dropping 0.3 percent in March from February, and 0.7 percent in July from June. Policy makers intervened four times, Mansoor Mohi-uddin , the chief currency strategist at Zurich-based UBS, Switzerland’s biggest bank, wrote in a report Nov. 26. After initially selling francs on March 12, when the exchange rate strengthened to 1.4753 per euro, the central bank intervened again on June 24 as the franc appreciated to 1.5012. The SNB also acted on Sept. 30, when it climbed to 1.5079, Mohi-uddin said. The SNB first sold the franc to counter a 7.6 percent advance against the euro in the previous six months. It fell as much as 3.6 percent versus the euro, the most since the 16- nation currency’s introduction in 1999. “The psychological level for euro-Swiss is 1.50, but the SNB has never committed itself to a specific rate,” said Marcus Hettinger , a foreign-exchange strategist at Credit Suisse in Zurich. “Our fair-value model shows the franc should be well below 1.50.” Franc Forecasts Contracts betting the franc would climb against the dollar rose to 25,333 on Nov. 10, compared with 2,482 wagers the Swiss currency would fall , according to data from the CFTC in Washington based on contracts at the Chicago Mercantile Exchange. The difference was the most since December 2004. The franc will strengthen to 97 centimes per dollar next year, according to UBS. Zurich-based Credit Suisse predicts 93 centimes. New York-based JPMorgan, which previously said the franc would trade at 1.01 per dollar, now says 91 centimes. UBS and JPMorgan, the No. 2 U.S. bank, say the franc will appreciate 4.1 percent to 1.45 per euro. Credit Suisse predicts 1.48. There’s a 59 percent chance the franc will reach Credit Suisse’s target against the dollar by the third quarter, implied volatility from options trading tracked by Bloomberg shows. The prediction by UBS and JPMorgan for the franc versus the euro has a 44 percent probability, according to the data. Strategic Bears Options show gains even as the median estimates in surveys of at least 28 analysts by Bloomberg forecast the franc will weaken in 2010, to 1.57 per euro and 1.08 per dollar. “It’s probably going to stay sideways against the euro,” said Scott Ainsbury , a money manager at New York-based FX Concepts, a currency-focused hedge fund. Switzerland’s trade surplus widened to 2.46 billion francs ($2.45 billion) in October, from the low this year of 156 million francs in March, data from the Federal Customs Administration show. The nation’s current-account surplus rose to 13.2 billion francs in the three months ended June 30, from 8.5 billion the previous quarter, according to SNB data. The projected 2009 surplus of 6.1 percent of gross domestic product compares with a deficit in the euro region of 0.7 percent of GDP, data from the International Monetary Fund compiled by Bloomberg show. ‘Psychological Level’ The franc is 4.6 percent undervalued against the euro, according to purchasing power parity, which measures the relative price of goods across countries, Bloomberg data show. “Next year the SNB is likely to start raising interest rates, and there will be a conflict between domestic monetary policy and exchange-rate policy and they will refrain from intervening,” UBS’s Mohi-uddin said. The SNB will boost the three-month Libor target rate to 0.50 percent from 0.25 percent by the third quarter, according to a weighted average of 14 analyst forecasts compiled by Bloomberg. The ECB will raise its main rate to 1.25 percent, from 1 percent, while the Fed’s rate will climb to 0.75 percent, from a range of zero to 0.25 percent, Bloomberg data show. Signs the recovery is spreading through the Swiss economy may make it easier for the SNB to reduce its intervention, said JPMorgan’s Meggyesi. Zurich-based ABB Ltd., the world’s biggest supplier of power grids, said third-quarter earnings before interest and tax rose 10 percent. Basel-based Novartis AG , Switzerland’s second- largest drugmaker, raised its 2009 sales forecast and reported higher third-quarter profit on Oct. 22 as revenue rose. “Ultimately, what will motivate the SNB to scale back this policy is a recognition that the policy is no longer economically necessary,” Meggyesi said. To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net ; Chris Fournier in Montreal at cfournier3@bloomberg.net

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Swiss Voters Approve Ban on Construction of Minarets in Popular Referendum

November 29, 2009

By Klaus Wille Nov. 29 (Bloomberg) — Swiss voters approved a proposal to outlaw the construction of mosque minarets, from where Muslims are called to prayer, the government said. The ban, sponsored by the right-wing Swiss People’s Party, was approved by “a majority of the Swiss people,” the government said in a statement from the capital Bern today. It didn’t give a breakdown of the vote. “The Federal Council respects this decision,” it said in the statement . “Consequently, the construction of new minarets in Switzerland is no longer permitted. The four existing minarets will remain. It will also be possible to continue to construct mosques. Muslims in Switzerland are able to practice their religion alone or in community with others, and live according to their beliefs just as before.” Pro-ban posters showing a black-veiled figure standing next to a Swiss flag covered in missile-like minarets were outlawed in several cities on the grounds that they were discriminatory. Campaigners for the ban argued that minarets are symbols of religious and political power that will pave the way for the eventual introduction of Sharia law in Switzerland. About 5 percent of the country’s 7.8 million people are Muslim. Government Opposition The government and a majority of Switzerland’s lawmakers opposed the initiative. The Justice Ministry contended a ban on new minarets would violate freedom of religion as well as Switzerland’s international human-rights commitments and fundamental rights under the Swiss constitution. Justice Minister Eveline Widmer-Schlumpf said today the outcome of the vote reflects fears about Islamic fundamentalist tendencies. “These concerns have to be taken seriously,” she said in the statement. “The Federal Council has always done so and will continue to do so in future. However, the Federal Council takes the view that a ban on the construction of new minarets is not a feasible means of countering extremist tendencies.” One of the country’s four minarets is in Geneva and another is in Zurich. To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net .

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Commodities Slump Most Since July on Stronger Dollar, Dubai Rescheduling

November 27, 2009

By Chanyaporn Chanjaroen Nov. 27 (Bloomberg) — Commodities slumped the most since July, led by a drop in crude oil and industrial metals, as Dubai’s attempt to reschedule its debt rattled investors and spurred a strengthening in the dollar. The S&P GSCI index of 24 commodities fell as much as 4.2 percent, the biggest drop since July 29. The index traded 3.6 percent lower at 496.164 as of 9:53 a.m. in London. Gold fell the most since January and oil retreated to a six-week low. The declines are “a correction reflecting the unfortunate timing of the Dubai news which spooked the markets,” Daniel Major , a London-based commodity analyst at RBS Global Banking and Markets, said by phone. “The sharp rally in the dollar is also driving gold.” Commodities, as measured by the S&P GSCI, jumped as much as 50 percent this year, amid the worst global recession since World War II. Copper and lead more than doubled and crude oil advanced as much as 82 percent as Chinese demand expanded and producers curbed supply. Investors are “chasing commodities” and there is a risk of bubbles emerging, Nouriel Roubini , the New York University professor who predicted the global financial crisis, said a week ago. The U.S. Dollar Index , a six-currency gauge of the greenback’s value, rose as much as 1 percent, strengthening for a second consecutive day. A stronger dollar makes commodities denominated in the currency more expensive for those holding other monies. Some investors also buy commodities as a hedge against a weaker dollar. Gold Declines Gold for immediate delivery lost as much 4.2 percent, the biggest intraday decline since Jan. 12. The metal traded at a record $1,195.13 yesterday and has advanced 32 percent this year, the best performance since 1979. Silver shed 3.6 percent to $17.9975 an ounce. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 1,134 metric tons in June. At the time, it exceeded Switzerland as the world’s sixth-largest gold holding. Crude oil fell as much as 7.1 percent to $72.39 a barrel on the New York Mercantile Exchange, where markets didn’t settle yesterday because of a public holiday. That was the lowest compared with intraday prices since Oct. 12. Lower-than-average volumes are being traded in commodity markets, RBS’s Major said. “You can’t read too much into this,” he said. Copper Retreats Copper for delivery in three months fell 1.2 percent to $6,738 a metric ton on the London Metal Exchange, declining for a second day and paring its annual gain to 119 percent. Aluminum, nickel, zinc, tin and lead also dropped. “Base metals are the commodity category with the highest correlation to equity markets and therefore suffered more than other commodity categories from the equity market sell-off,” Tobias Merath , head of commodities research at Credit Suisse in Zurich, wrote today in an e-mailed report. In agricultural markets, wheat fell 2.6 percent to $5.565 a bushel in Chicago trading. Corn declined 2.1 percent to $3.995 a bushel and soybeans dropped 2.4 percent to $10.2875 a bushel. The market was closed yesterday for Thanksgiving Day. Dubai World, the government investment company with $59 billion of liabilities, sought to delay repayment on much of its debt. To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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Siemens Hearing-Aid Division Said to Draw Interest From KKR, BC Partners

November 26, 2009

By Aaron Kirchfeld Nov. 27 (Bloomberg) — Siemens AG’s hearing aid business, valued at as much as 3 billion euros ($4.5 billion), is drawing interest from private-equity firms including KKR & Co. L.P. and BC Partners Ltd., two people familiar with the matter said. Several financial investors have contacted the Munich-based company about buying the unit, said the people, who requested anonymity because the process isn’t public. Siemens has been in contact with investment banks about options, and hasn’t decided whether to sell the unit or conduct an initial public offering, though an exit from the business is likely, the people said. Siemens claims the No. 1 position in the global hearing aid market by units manufactured. It trails Sonova Holding AG of Switzerland and William Demant Holding A/S of Denmark by market share, according to Sonova. Siemens, Europe’s largest engineering company, is weighing a retreat from the industry to sharpen its focus on energy, transport and infrastructure, as well as on medical diagnostics tools, the people said. In addition to private-equity firms, makers of medical equipment may also be interested, the people said. Antitrust hurdles would bar Sonova and William Demant from a takeover, the people said. Siemens spokesman Constantin Birnstiel declined to comment, as did spokespeople for KKR and BC Partners in Germany. High Margins “Siemens hearing aids is attractive because the sector has relatively high margins and the business could be further improved by a new owner,” said Daniel Jelovcan , a Zurich-based health-care products analyst at Helvea AG. He estimates the unit could be valued at 2.5 billion euros to 3 billion euros, based on estimated sales of 680 million euros and peer valuation. Siemens, which also makes high-speed trains, power grids and medical scanners, doesn’t disclose sales for its hearing aids. The company has been making the products for more than 100 years , and the business is based in Erlangen in southern Germany, home to some of Siemens’s largest production sites. The unit may fetch 2 billion euros to 3 billion euros in a sale, the people said. The engineering company will likely pursue a so-called dual-track process of seeking a buyer while simultaneously preparing an IPO for 2010, the people said. The company followed a similar strategy with its VDO automotive division, which it sold to Continental AG for 11.4 billion euros in 2007 after simultaneously holding sales talks and preparing an IPO. Past Deals KKR has done deals with Siemens in the past. The private- equity firm run by Henry Kravis and George Roberts bought Wincor Nixdorf AG, a maker of bank machines, in 1999 from Siemens, as well as seven engineering units for 1.69 billion euros, including Demag Cranes AG, in 2002. Sonova Chief Executive Officer Valentin Chapero said on Nov. 14 it “wouldn’t be surprising” if Siemens sold its hearing-aid unit because it’s not “well adapted” to the rest of the German company’s business. The Swiss company has gained 87 percent so far this year, valuing Sonova at 7.77 billion Swiss francs ($7.74 billion). William Demant has a market value of 21.3 billion Danish kroner ($4.3 billion) after doubling in value in the last year. Other competitors include closely held Kind Hoergeraete, based in Hanover, Germany, and Fielmann AG , the German eyeframe manufacturer, which is branching out into hearing aids as an ageing population and ear damage caused by loud music increase the number of people with hearing disabilities. Hermann Requardt , the chief executive officer of Siemens’s health-care division, said on Sept. 29 at a meeting with analysts and investors that the hearing aids are “a very solid business and a strong contributor.” To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Siemens Hearing Aids Unit Said to Attract Interest From KKR, BC Partners

November 26, 2009

By Aaron Kirchfeld Nov. 26 (Bloomberg) — Siemens AG’s hearing aid business, valued at as much as 3 billion euros ($4.5 billion), is drawing interest from private-equity firms including KKR & Co. L.P. and BC Partners Ltd., two people familiar with the matter said. Several financial investors have contacted the Munich-based company about buying the unit, said the people, who requested anonymity because the process isn’t public. Siemens has been in contact with investment banks about options, and hasn’t decided whether to sell the unit or conduct an initial public offering, though an exit from the business is likely, the people said. Siemens claims the No. 1 position in the global hearing aid market by units manufactured. It trails Sonova Holding AG of Switzerland and William Demant Holding A/S of Denmark by market share, according to Sonova. Siemens, Europe’s largest engineering company, is weighing a retreat from the industry to sharpen its focus on energy, transport and infrastructure, as well as on medical diagnostics tools, the people said. In addition to private-equity firms, makers of medical equipment may also be interested, the people said. Antitrust hurdles would bar Sonova and William Demant from a takeover, the people said. Siemens spokesman Constantin Birnstiel declined to comment, as did spokespeople for KKR and BC Partners in Germany. High Margins “Siemens hearing aids is attractive because the sector has relatively high margins and the business could be further improved by a new owner,” said Daniel Jelovcan , a Zurich-based health-care products analyst at Helvea AG. He estimates the unit could be valued at 2.5 billion euros to 3 billion euros, based on estimated sales of 680 million euros and peer valuation. Siemens, which also makes high-speed trains, power grids and medical scanners, doesn’t disclose sales for its hearing aids. The company has been making the products for more than 100 years , and the business is based in Erlangen in southern Germany, home to some of Siemens’s largest production sites. The unit may fetch 2 billion euros to 3 billion euros in a sale, the people said. The engineering company will likely pursue a so-called dual-track process of seeking a buyer while simultaneously preparing an IPO for 2010, the people said. The company followed a similar strategy with its VDO automotive division, which it sold to Continental AG for 11.4 billion euros in 2007 after simultaneously holding sales talks and preparing an IPO. KKR has done deals with Siemens in the past. The private- equity firm run by Henry Kravis and George Roberts bought Wincor Nixdorf AG, a maker of bank machines, in 1999 from Siemens, as well as seven engineering units for 1.69 billion euros, including Demag Cranes AG, in 2002. Sonova Chief Executive Officer Valentin Chapero said on Nov. 14 it “wouldn’t be surprising” if Siemens sold its hearing-aid unit because it’s not “well adapted” to the rest of the German company’s business. The Swiss company has gained 87 percent so far this year, valuing Sonova at 7.77 billion Swiss francs ($7.74 billion). To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Dubai Debt Rattles Confidence in Persian Gulf Borrowers

November 26, 2009

By Laura Cochrane and Tal Barak Harif Nov. 26 (Bloomberg) — Dubai is shaking investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001. The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the biggest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Bonds of its property unit, Nakheel PJSC, mature Dec. 14. Dubai contracts climbed 131 basis points to 571, the most since they began trading in January, adding to 120 yesterday, CMA Datavision prices showed. “There is nothing investors dislike more than this kind of event,” said Norval Loftus , the head of convertible bonds and Islamic debt at Matrix Group Ltd. in London, which manages $2.5 billion of assets including Dubai credits. “The worst-case scenario will of course be involuntary restructuring on the Nakheel security that brings into question the entire nature of the sovereign support for various borrowers in the region.” Moody’s Investors Service and Standard & Poor’s cut the ratings on state companies yesterday, saying they may consider state-controlled Dubai World’s plan to delay debt payments a default. The sheikhdom, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom that reduced its reliance on falling oil supplies and created the region’s tourism and financial hub. ‘Further Defaults’ “Dubai is the most indicative of the huge global liquidity boom and now in the aftermath there will be further defaults to come in emerging markets and globally,” said Nick Chamie , head of emerging-market research at Toronto-based RBC Capital Markets. Stocks, bonds and currencies fell across developing countries. The MSCI Emerging Markets Index of stocks dropped 1.1 percent, led by declines in China and Russia. South Africa’s rand weakened 1.6 percent against the dollar and the Turkish lira slumped 1.2 percent. Hungary’s forint lost 1.1 percent per euro. Credit-default swaps on Russia increased to 211 basis points from 192. Gulf region default swaps jumped, with contracts linked to Bahrain rising 37 basis points today to 231.5, the biggest increase since Feb. 18. Contracts linked to Abu Dhabi rose the most since February yesterday, climbing 36 basis points to 136.5 and were quoted at 134.5 at 8:58 a.m. in London, according to London-based CMA. Qatar default swaps advanced 11 basis points to 115, adding to the same increase yesterday, the biggest gain since September. Saudi Debts Saudi Arabia contracts climbed the most since June yesterday, adding 15 basis points to 90. The British Bankers’ Association asked the U.K. government to intervene with Saudi authorities over debts of at least $20 billion owed to as many as 100 banks by Saad Group and Ahmad Hamad Algosaibi & Brothers Co., two family holding companies based in the oil city of Al- Khobar, according to a letter dated Nov. 20. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt. Dubai’s contracts, which increase as perceptions of credit quality deteriorate, are the fifth most expensive worldwide, exceeding Iceland’s and Latvia’s. Argentina Default Default swaps on Dubai World unit DP World Ltd., the Middle East’s biggest port operator, jumped by a record 181 basis points to 540.5 yesterday and were priced at 539.5 today, according to CMA data. “DP World and its debt are not included in the restructuring process for Dubai World,” the government said in a statement to Nasdaq Dubai today. The price of Nakheel’s bonds fell to 84.5 cents on the dollar from 110.5 on Nov. 24, according to Citigroup Inc. prices on Bloomberg. UBS AG, Switzerland’s largest bank, said it expects the U.A.E. will prevent a default by Nakheel. Dubai is one of seven sheikhdoms in the U.A.E. that includes Abu Dhabi, which holds 8 percent of the world’s oil reserves and bought $5 billion of bonds sold by Dubai yesterday through state-controlled banks. Unlike Argentina, which stopped payments on $95 billion of debt eight years ago after yields on benchmark bonds more than doubled in four months to more than 40 percent, Dubai’s announcement yesterday “was a surprise,” said Alia Moubayed , a London-based economist at Barclays Plc. Standstill Agreement The government raised $1.93 billion last month in its first sale of Islamic bonds, attracting more than $6.3 billion of orders. The dollar-denominated securities due 2014, which are governed by Shariah laws barring investors from profiting from the exchange of money, dropped to 8.1 percent today to 89.5 cents, lifting the yield to 9.1 percent from 6.2 percent on Nov. 24, according to ING Groep NV prices on Bloomberg. “The uncertainty and unpredictability around upcoming debt repayments implied by” yesterday’s announcement “will add to pressure on Dubai spreads, which may lead to a re-pricing of Dubai and U.A.E. risk,” Moubayed wrote in a report yesterday. Dubai World will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from Nakheel PJSC, Dubai’s Department of Finance said in an e-mailed statement yesterday. Sheikh Mohammed removed the chairman of Dubai World from the board of Dubai’s main holding company, the Investment Corporation of Dubai, last week. Dubai World had $59.3 billion in liabilities and $99.6 billion in total assets at the end of 2008, subsidiary Nakheel Development Ltd., said in an August statement. Dubai owes $4.3 billion next month and $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. Writedowns Dubai World’s more than 70 creditors face the prospect of writedowns on as much as $60 billion of debt if they haven’t unloaded their holdings and the state-owned company fails to win additional support from Abu Dhabi. The biggest creditors are Abu Dhabi Commercial Bank and Emirate NBD PJSC. Other lenders include Credit Suisse Group AG, HSBC Holdings Plc, Barclays, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, according to a person familiar with the situation. Emaar Properties PJSC, U.A.E.’s biggest developer, was cut by four levels to Ba2, two steps below investment grade, by Moody’s. Jebel Ali Free Zone, an operator of business parks, and DIFC Investments were also cut to speculative-grade by Moody’s yesterday. DP World and Dubai Electricity & Water Authority were lowered by two levels to Baa2, two levels above junk. Moody’s and S&P said they may cut ratings further. The debt “restructuring may be considered a default under our default criteria,” S&P said in a statement. Abu Dhabi Program Borrowing from Abu Dhabi state banks accounted for half the $10 billion Dubai ruler Sheikh Mohammed said he planned to raise by yearend. He said Nov. 9 the program will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Sheikh Mohammed turned to Abu Dhabi’s central bank on Feb. 23 to raise $10 billion by selling debt. The emirate’s credit default swaps dropped 178 basis points that day, after trading for a record 976 basis points. “It’s very important to resolve this in a way that will minimize contagion across the region,” Matrix Group’s Loftus said. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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Aussie Dollar, Metals Rise on Evidence of Economic Rebound; Stocks Advance

November 25, 2009

By Mark Gilbert Nov. 25 (Bloomberg) — The Australian dollar rose and commodities gained on evidence economies are rebounding from the first global recession since World War II. Stocks advanced, while returns on emerging-market bonds climbed to the highest level in at least 16 years. Australia’s currency strengthened 1 percent against the dollar, while the Dollar Index declined 0.5 percent at 10:20 a.m. in London. The MSCI World Index of 23 developed markets added 0.6 percent. Futures on the Standard & Poor’s 500 Index gained 0.5 percent. Gold rallied 1.1 percent to a record $1,180.40 an ounce in London, and lead paced gains in industrial metals. The Federal Reserve raised its forecast for 2010 U.S. growth yesterday to a range of 2.5 percent to 3.5 percent, from 2.1 percent to 3.3 percent. Australian central bank Deputy Governor Ric Battellino said the economy has entered a “new upswing,” while the U.K. reported that gross domestic product shrank 0.3 percent in the third quarter, better than the initial 0.4 percent estimate. “The macro setting is clearly improving,” said Franz Wenzel , deputy director of investment strategy at Axa Investment Managers in Paris, in a Bloomberg Television interview. Axa oversees about $600 billion. “GDP is going to continue to expand and central banks will remain fairly accommodative.” Pound Climbs The Australian dollar led gains by so-called commodity currencies, climbing against all 16 of its most-traded counterparts. The pound rose 0.6 percent compared with the dollar and 0.2 percent versus the euro, snapping a five-day decline against the single European currency. The yen advanced 0.9 percent to 87.71 per dollar, climbing to the strongest level since Jan. 21, after a government report showed Japan’s exports fell at the slowest pace in a year last month. The falling dollar sent gold to record highs in New York, London and Shanghai, helped by a report in the Financial Chronicle newspaper that India may purchase more bullion for its central bank reserves. Three-month lead gained 1.7 percent to $2,373 a metric ton on the London Metal Exchange, and copper advanced 1.2 percent to $6,949 a ton. Soybeans for January delivery climbed for a second day in Chicago, rising 0.3 percent to $10.495 a bushel, on speculation demand will increase in China, the world’s biggest oilseed importer. The Dow Jones Stoxx 600 Index of European shares added 0.7 percent as raw-material producers climbed with metals. BHP Billiton Ltd. , the world’s largest mining company, advanced 2.4 percent in London. France Telecom France Telecom SA gained 1.6 percent in Paris. Europe’s third-biggest phone company will merge its Orange Switzerland unit with TDC A/S’s Sunrise Communications SA division to expand in Switzerland and pay 1.5 billion euros ($2.25 billion) for a majority stake. The MSCI Asia Pacific Index added 1.2 percent. Fuji Heavy Industries Ltd., the maker of Subaru cars, rose 5.3 percent in Tokyo after the exports data. U.S. stock-index futures climbed before reports on consumer spending and confidence, durable-goods orders, initial jobless claims, and new-home sales. Trading may be slower than usual as investors leave early for the Thanksgiving holiday tomorrow. A report from the Commerce Department at 8:30 a.m. in Washington may show consumer spending increased 0.5 percent last month after dropping by the same amount in September, according to the median estimate of 75 economists. Orders for durables, goods meant to last at least three years, rose 0.5 percent in October after a 1.4 percent gain the previous month. Emerging-Market Bonds Emerging-market bond yields fell 4 basis points relative to U.S. Treasury notes, pushing JPMorgan Chase & Co.’s benchmark Emerging Markets Bond EMBI+ Index of total returns to a record high of 496. The index measures the average return on emerging- market international bonds since December 1993. The MSCI Emerging-Markets Index of equities gained 0.5 percent. South Africa’s rand climbed 0.8 percent against the dollar, leading gains in developing-nation currencies. Fed officials are concerned that record-low interest rates might fuel “excessive” speculation in financial markets and possibly dislodge expectations for low inflation, according to minutes of their Nov. 3-4 meeting published yesterday. The European Central Bank is debating whether to modify the loans it makes available as it starts to scale back support for the region’s banks. Treasuries fell, with the yield on the 10-year note rising 1 basis point to 3.32 percent, according to BGCantor Market Data. The U.S. is scheduled to auction a record $32 billion of seven-year notes today, the third sale of securities this week. To contact the reporter on this story: Mark Gilbert in London at magilbert@bloomberg.net .

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France Telecom Will Pay TDC $2.25 Billion in Merger of Swiss Mobile Units

November 25, 2009

By Diana ben-Aaron Nov. 25 (Bloomberg) — France Telecom SA will merge its Orange Switzerland unit with TDC A/S’s Sunrise Communications SA division to expand in Switzerland and will pay 1.5 billion euros ($2.25 billion) for a majority stake. France Telecom , Europe’s third-largest phone company, will have a 75 percent holding, while TDC will have 25 percent, the Paris-based company said in a statement today. The deal is expected to close in the second quarter, TDC said in a separate statement. France Telecom bid unsuccessfully for Sunrise, Switzerland’s second largest wireless provider, in 2008. Sunrise has about 20 percent of the mobile phone market compared with 18 percent for France Telecom’s Orange brand and 62 percent for Bern-based Swisscom AG, the country’s largest operator. The divestment is “a natural last step” for TDC in narrowing its focus to the Nordic markets, it said in a statement. “This merger is a further proof of France Telecom’s lasting commitment and will offer us fabulous opportunities by creating the leading alternative operator in the Swiss telecom market,” said Thomas Sieber, chief executive officer of Orange Switzerland. He will be in charge of the new company. The merged unit would have had revenue of 2 billion euros last year, according to France Telecom. The combination will have about 38 percent of the mobile market in Switzerland and 13 percent of fixed broadband connections, it said. TDC will take an impairment charge of 4.3 billion kroner ($870 million) in the fourth quarter on the transaction, the Copenhagen-based operator said today in a statement. It may dispose of its stake through a share buyback or a sale to third parties. To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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Commodities to Attract Record $60 Billion Inflows This Year, Barclays Says

November 20, 2009

By Stuart Wallace Nov. 20 (Bloomberg) — Commodities will likely attract a record $60 billion this year as investors seek to diversify their assets, Barclays Capital said. Inflows so far this year are almost $55 billion, already more than the previous full-year record of $51 billion set in 2006, the bank said in a report. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year, Barclays said. “Sharp falls in commodity prices earlier in the year created opportunities for long-term exposure, providing an opportunity for investors to act on their interest in commodities as a diversification tool,” analysts including London-based Gayle Berry and Suki Cooper said in the report. The S&P GSCI Index of 24 commodities rose 46 percent this year, rebounding from last year’s 43 percent slump, as governments spent at least $12 trillion to lift their economies from the worst recession since World War II. Copper, lead and sugar doubled and gold reached a record. “A strong end to the year for commodity prices does look likely, especially if the dollar continues to weaken, which should be especially beneficial for gold,” the analysts said. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 1,134 metric tons in June. At the time, it exceeded Switzerland as the world’s sixth-largest gold holding. The Dollar Index , a six-currency gauge, fell 7.3 percent this year, buoying demand for commodities as a hedge against further weakness in the currency and making dollar-denominated commodities cheaper for those holding other monies. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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UBS’s Kengeter May Drop Debt-Leadership Role to Focus on Investment Bank

November 18, 2009

By Elena Logutenkova and Jacqueline Simmons Nov. 18 (Bloomberg) — Carsten Kengeter may relinquish his role leading the fixed-income, currencies and commodities division at UBS AG early next year to focus on his position as co-chief of the investment bank, two people with knowledge of the situation said. Kengeter, 42, would leave leadership of the global fixed- income business to Jeffrey Mayer , 50, who currently co-heads the unit with him, said one of the people, who declined to be identified because the information hasn’t been publicly announced. UBS officials declined to comment. UBS, Switzerland’s largest bank, will aim to reach an annual pretax profit of 6 billion francs ($5.9 billion) at the investment bank over the next three to five years, after losses since 2007, the company said yesterday. UBS intends to increase annual revenue at the debt unit to 8 billion francs in the period, close to the levels achieved before the credit crisis led to record losses at the bank. “The recovery in the investment bank assumes a substantial increase in foreign exchange, rates and credit flow trading revenues, businesses where market revenue pools are in sharp decline,” Dirk Hoffmann-Becking , a Sanford C. Bernstein Ltd. analyst, said in a note today. “Our estimate of investment bank revenues and operating results in the near or medium term are far below UBS targets.” No ‘Plan B’ The debt division made 8.3 billion francs of revenue in 2006, compared with a negative 1 billion francs in the first nine months of 2009. The equities business is targeting more than 7 billion francs in annual revenue, while the investment- banking unit aims to generate more than 4 billion francs per year. The units brought in 8.4 billion francs and 5 billion francs, respectively, in 2006. “This plan is not overly ambitious,” Kengeter told investors in Zurich yesterday. He joined UBS in September 2008 to head the debt business before being named co-chief executive officer of the investment bank with Alexander Wilmot-Sitwell in April. “In the fixed-income business, I don’t think we need a plan B.” More than half the FICC revenue will be coming from foreign exchange trading, where UBS said it’s ranked No. 2 globally, and the rates business, which will be built out further, he said. The credit trading business aims to make more than 1 billion francs in revenue annually, and emerging markets are expected to generate about 1.5 billion francs per year. Kengeter and Mayer made 200 hires for the debt unit this year, which now employs about 1,700 people. The bank in May hired Rajeev Misra , who previously worked for Deutsche Bank AG, as global head of credit trading. Dimitri Psyllidis , formerly at Merrill Lynch & Co., joined to head foreign exchange and rates trading globally in August. Weekly Risk Calls The unit’s headcount is 36 percent smaller than in 2007, and assets are down 64 percent. UBS plans to boost risk-taking at the investment bank without expanding its balance sheet , Kengeter and Wilmot-Sitwell, 48, told investors yesterday. It aims to generate higher returns on the same amount of assets by holding onto them for a shorter period of time, increasing the “velocity” of its balance sheet, they said. UBS’s debt business was responsible for most of the $52.5 billion in writedowns and losses during the credit crisis, which forced the bank to take a lifeline from the Swiss government a year ago. A turnaround at the division will be “central” to the bank’s goal of reaching an annual pretax profit of 15 billion francs in three to five years, it said. Chief Executive Officer Oswald Gruebel yesterday pledged to “ensure that what has happened to UBS will not happen again.” Since taking over in February, Gruebel instituted a weekly call with the chief risk officer to control the bank’s holdings and strategy. “I feel responsible for that stuff. You can ask the guys, and I do feel responsible for that,” Gruebel said. To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net Jacqueline Simmons in Paris at jackiem@bloomberg.net ;

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