Monday, March 30, 2009

BYD yearly net profit down 36.6 pct.

    March 30 (Reuters) - Year ended December 31, 2008 
    (in million yuan unless stated) 
    Shr (yuan)               0.50      vs 0.79 
    Net                      1,021.25  vs 1,611.71 
    Revenue                  26,788.25 vs 21,211.21 
    Company name             BYD Co. Ltd. 
    NOTE - BYD <1211.HK> is engaged in the research, development, 
manufacture and sale of rechargeable batteries, liquid crystal 
display and other electronic products. 
    The calculation of share earnings is based on the weighted 
average of 2,050.10 million shares in issue during the two years. 
    Total dividend for year is nil vs 1.3 yuan in 2007. 
    The figures are prepared in accordance with Hong Kong 
Financial Reporting Standard ("HKFRS").

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Saturday, March 28, 2009

Soros says failed UK bond auction just 'a blip'

LONDON - George Soros said on Saturday that Britain's first failed government bond auction since 2002 was just 'a blip' but it was conceivable that Britain might end up seeking help from the International Monetary Fund (IMF).

The financier told the Times newspaper he agreed with Bank of England Governor Mervyn King that rising British debt was a problem, adding that a glut of borrowing could scare away investors.

'I think it will have an effect, yes, it is a matter of worry because effectively the hole in the banking system is replaced by increasing the national debt,' he said.

Mr King told a parliamentary committee on Tuesday that the government's burgeoning budget deficit meant it would have to be cautious about any new fiscal stimulus package to boost the economy.

The following day the sale of 40-year British government bonds failed after there were too few bids for the &pound1.75 billion (US$2.51 billion) of gilts on offer.

Mr Soros echoed the Treasury's assertion that the failure was an isolated incident and not part of a broader drop in demand.

'That was a blip,' he said. But asked whether Britain could end up going cap in hand to the IMF, he said it was a possibility.

'It's conceivable. You have a problem that the banking system is bigger than the economy ... so for Britain to absorb it alone would really pile up the debt ... if the banking system continued to collapse, it's a possibility but it's not a likelihood,' he said.

Britain last sought IMF help in 1976 in a move that destroyed the Labour party's economic reputation for a generation.

Mr Soros, who famously made US$1 billion shorting the pound on Black Wednesday in 1992, said he was not currently betting against sterling.

'I shorted it last year, but I'm not shorting the pound now.' -- REUTERS

Friday, March 27, 2009

Solar shares rally on new Chinese subsudy

NEW YORK, March 26 (Reuters) - Shares of solar companies rallied sharply on Thursday after the Chinese government said it would launch a generous new subsidy for the clean power systems.

Chinese-based companies were the biggest gainers, with Trina Solar Ltd <TSL.N> up 40 percent at $12.14 per share, Suntech Power Holdings <STP.N>, up 40 percent at $10.96, LDK Solar Co <LDK.N>, up 36 percent at $8.00, Yingli Green Energy <YGE.N> up 39 percent at $5.75, Solarfun Power Holdings <SOLF.O> up 26 percent at $4.48 and Canadian Solar <CSIQ.O>, up 23 percent at $5.95.

Those shares had been hard hit so far this year as financing for new solar projects dried up, but the news that China would move to support the industry spurred hopes that the government could open up a potentially huge market for the industry.

"This is a pleasant bit of news out in what has been a quite bleak time for the solar industry. The numbers are quite substantive," said Edward Guinness, co-manager of the Guinness-Atkinson Alternative Energy Fund which owns shares in several solar companies.

According to a statement on a Chinese government website, solar projects larger than 50 kilowatts of output will be eligible for a subsidy of about $2.90 per watt.

"We believe meaningful upside potential exists if government support for domestic solar sector continues," a Barclays analyst wrote in a research note, adding the move could boost Chinese demand by about 200 megawatts starting in the second half of 2009, a nearly four-fold increase from Barclays' projection for this year.

China is home to several solar power companies, but most of the sales are to Germany and Spain, the two largest markets in the world. The United States is the third largest market.

The crisis in financial markets has shut off much of the funding for new projects since late last year, while weakness in the euro versus the dollar has eroded profit margins for companies that sell into the European market.

One analyst said while the news was clearly positive for the solar sector, many details had yet to emerge.

"Although the subsidy may cover about 60 percent-plus of the cost of installation, it is unclear how much the energy generated from the system will be valued," Piper Jaffray analyst Jesse Pichel said in a note to investors.

The news also boosted shares of U.S. companies First Solar Inc <FSLR.O> by 14 percent to $152.96 per share and SunPower Corp <SPWRA.O> by 15 percent to $27.66, while Germany's Q-Cells <QCEG.DE> rose 21 percent to 18 euros and Norway's Renewable Energy Corp (REC) <REC.OL> gained 18 percent to 58.40 crowns. (Reporting by Matt Daily and Wanfeng Zhou in New York and Nichola Groom in Los Angeles, editing by Matthew Lewis) ((matt.daily@thomsonreuters.com; + 1 646 223 6121; Reuters Messaging: matt.daily.reuters.com@reuters.net)) Keywords: SOLAR/SHARES

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China bilateral currency swaps

     BEIJING, March 27 (Reuters) - China this week signed a 100 billion yuan 
($14.6 billion) currency swap with Indonesia, its fifth such agreement since 
December. 
    The main purpose of the bilateral swaps, which total 580 billion yuan, is to 
promote trade, and Chinese exporters could be the biggest beneficiaries. For a 
related analysis, double-click on: [ID:nPEK66902] 
    Here is a breakdown of the swap agreements and 2008 trade figures: 
                  SWAP LINE:         CHINA EXPORTS TO:       CHINA IMPORTS FROM: 
 1. South Korea   180 bln yuan/              
    (Dec 12)      38 trln won                $74.0 bln               $112.2 bln 
 2. Hong Kong     200 bln yuan/                       
    (Jan 20)      227 bln HK dollar         $190.7 bln                $12.9 bln 
 3. Malaysia      80 bln yuan/ 
    (Feb 8)       40 bln ringgit             $21.4 bln                $32.1 bln 
 4. Belarus       20 bln yuan/ 
    (March 11)    8 trln Bel. ruble          $1.42 bln                 $0.62 bln 
 5. Indonesia     100 bln yuan/ 
    (March 23)    175 trln rupiah            $17.2 bln                $14.3 bln 
 ($1=6.831 Yuan)

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In the Geithner Plan, the Devil Is Lurking in the Details

MARCH 27, 2009

Treasury Secretary Tim Geithner's plan to address "systemic risks" in financial markets offers several solutions, and each raises questions.

PROPOSAL: Systemic-risk overseer.

TRANSLATION: Firms whose collapse might imperil the whole economy would be brought under the supervision of a new über-regulator, possibly the Federal Reserve, which would be in charge of ensuring the firms aren't taking on too much risk.

DEBATE: Which firms qualify as systemically important?

PROPOSAL: Beef up capital and risk-management standards.

TRANSLATION: Such too-big-to-fail firms would have to lock away a bigger proportion of their assets to protect against unexpected losses. They would also have to keep better track of their links to other institutions -- through derivatives trades, for example.

DEBATE: Will tightening rules for big, important firms hinder economic growth?

PROPOSAL: Hedge-fund registration.

TRANSLATION: Hedge funds above a certain size would have to register with the SEC and provide information to the regulator about their trading and portfolios. The goal is to discover which funds could represent a threat to the economy. Those deemed potential threats would be regulated.

DEBATE: Hedge funds say they didn't cause the crisis and shouldn't be penalized.

PROPOSAL: Comprehensive oversight of derivatives.

TRANSLATION: Exotic and hard-to-follow trades can cause disruption if one party collapses, as in the case of Lehman Brothers and AIG. This proposal would regulate such instruments as credit-default swaps. They would be traded through a clearinghouse, making it easier to know who owes what to whom.

DEBATE: Could such a move deter financial innovation?

PROPOSAL: Beef up regulation of money-market funds.

TRANSLATION: A run last year on money-market funds, one of the safest investments around, caused widespread disruption. New rules could reduce the impact any one fund could have on the market as a whole.

DEBATE: Could tougher regulation turn off consumers from an investing staple?

PROPOSAL: Create a new resolution authority.

TRANSLATION: The government can take over and unwind failing banks, but it can't do the same with other financial institutions. That is one cause of the ad hoc rescues of such companies as AIG. Mr. Geithner wants to give the government power to unwind -- or "resolve" -- institutions that may pose systemic risks.

DEBATE: Who will provide the funding? Who should be in charge of the process?

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Singapore asks china to supervise S-chip firms

* Singapore cbank chairman visiting China

* talks to officials on recent scandals of S-chip firms

SINGAPORE, March 27 (Reuters) - Singapore's Senior Minister Goh Chok Tong called on Chinese authorities to maintain "stringent supervision" over their companies that list in the city-state, the Business Times newspaper reported on Friday.

Goh, chairman of central bank and financial regulator the Monetary Authority of Singapore, was speaking to officials in Guangdong province in the wake of scandals that have hit Chinese firms listed in Singapore, or S-chips, in recent months.

"It's a way of helping them brand themselves," Goh told reporters in Shenzhen, the newspaper said. "If they allow a small percentage of these companies to defraud investors, that's going to spoil the reputation of other Chinese companies, good companies, listed in Singapore."

Renewable energy firm China EnerSave <CENE.SI> said on Thursday a subsidiary defaulted on the repayment of bank loans of 898.8 million yuan ($131.6 million) in China and the company has also defaulted on a loan repayment of $20 million.

Earlier this month, Chinese-based education provider Oriental Century <ORNL.SI>, partly owned by Singapore's Raffles Education <RLSE.SI>, said its chief executive Wang Yuean "substantially inflated" the company's balance sheet for its 2008 full year financial results.

Along with Oriental Century, shares in FibreChem Technologies <FIBR.SI> and China Sun Bio-Chem <CSUN.SI> are suspended from trading over alleged accounting irregularities.

There are over 100 Chinese companies listed in Singapore, and at least 25 are from Guangdong, one of China's richest provinces and a manufacturing hub, the newspaper said.

Goh, a former prime minister, said he had heard some 900 firms in Shenzhen had closed down but the city was expecting 10 percent growth this year.

"If we tighten (regulations) too much, we can lose some of these companies from being listed every year," Goh said. "If we don't tighten, then we have other problems."

Singapore Exchange <SGXL.SI>, Asia's second largest-listed bourse, is also home to listings from Indonesian, Malaysian and Indian firms, but new initial public offerings have slowed to a trickle as investors fled slumping stock markets. (Reporting by Neil Chatterjee; Editing by Dhara Ranasinghe) ((neil.chatterjee@thomsonreuters.com, +65 6403 5657)) ($1=6.832 Yuan)

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Petrochina seeks nod for 100 bln yuan bond

HONG KONG, March 26 (Reuters) - PetroChina Co Ltd <0857.HK> said on Thursday that it would seek shareholders' approval to issue up to 100 billion yuan ($14.6 billion) worth of bonds.

The bonds, with a maturity of not more than 15 years, could be denominated in yuan or other foreign currency, the company said in a statement to the Hong Kong stock exchange.

The proceeds from the issue would be used to fund operational needs, increase the company's liquidity, or finance capital spending, it said. (Reporting by Jun Ebias, editing by Will Waterman) ($1=6.832 Yuan)

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Thursday, March 26, 2009

Obama to tighten reins on Wall St; US data cheer

* Obama administration to tighten reins on Wall Street

* Asian stocks gain more than 2 pct on US recovery hopes

* Toyota sees no upturn in US car market in March

* British gilt auction fails; US sale sees tepid demand

* EU's Juncker rules out spending increase on "U.S. demands" (For more on the financial crisis, double-click [nCRISIS])

By David Lawder

WASHINGTON, March 26 (Reuters) - The U.S. government will propose tough new financial rules on Thursday as part of its push to stabilise the economy and curb excessive risk-taking that nearly wrecked its banks and set off a world financial crisis.

The proposals follow some tentative signs that the world's biggest economy may have stopped shrinking and the announcement earlier this week of Washington's plan to purge banks of up to $1 trillion in toxic assets at the root of the global credit rout.

The regulatory initiatives also come at a time of President Barack Obama's push to win Congress backing for his around $3.5 trillion 2010 spending plan, which he says is "inseparable" from his effort to pull the U.S. economy out of recession. [ID:nN25366717]

Obama's administration wants to create a powerful systemic risk regulator with the authority to look deep into non-bank financial firms, such as hedge funds and private equity firms, officials said. [ID:nSP492019]

The proposals also aim to regulate credit default swaps and over-the-counter derivatives for the first time, said the officials, speaking on condition of anonymity.

Treasury Secretary Timothy Geithner will outline the plans to Congress on Thursday, and the proposals will serve as the basis for discussions on regulatory reform when Obama meets Group of 20 (G20) leaders of the world's top economies in London next week.

Latest government reports showed the U.S. manufacturing and housing sectors may have begun recovering from the recession that began in December 2007. [ID:nN25415362]

DEBT WORRIES

U.S. stocks rose after the data, but tepid demand for U.S. and British debt at bond auctions fed into growing concern whether, and at what cost, governments will be able to borrow enough to cover the soaring costs of economic pump-priming.

Such worries came to haunt New Zealand on Thursday, caught between the pressure to help the economy with more aggressive interest rate cuts and the need to keep debt yields attractive enough for foreign investors to help finance its debt. [ID:nLP725712]

There were also more signs that Obama will need to overcome scepticism about his spending plans at home, and it will be a tough sell for him to persuade G20 leaders next week to keep public cash taps open.

A leading euro zone finance minister rebuffed U.S. calls for more spending and concerted action, arguing Europe has done enough to help its economies recover from the deepest global recession since World War Two.

Asian stocks followed Wall Street gains, climbing more than 2 percent to 11-week highs <MIAPJ0000PUS> after data showed new U.S. orders for durable goods rose in February for the first time in seven months and new home sales rebounded. [ID:nN25415362]

Asian chip makers, such as Hynix <000660.KS> and Elpida Memory <6665.T>, offered another reason to cheer, citing signs of recovery for the battered industry heavily exposed to global swings in demand. [ID:nSEO372999]

Sceptics say, however, it is too early to declare a bottom, and two top Federal Reserve officials warned the U.S. recession would drag on for some months before a recovery starts late this year or in early 2010. [ID:nN25424761] Toyota <7203.T>, the world's No. 1 carmaker, also sounded a word of caution, predicting no improvement in U.S. industrywide car sales in March after they plunged to a 27-year low in the first two months of the year.

"Annualised sales in January and February were a little above 9 million, and we're hearing that March will be about the same if not worse than February," President Katsuaki Watanabe told reporters.

A German measure of consumer sentiment compiled by market research group GfK also showed on Thursday that the mood remained downbeat in Europe's biggest economy, despite 81 billion euros ($110 billion) of fiscal stimulus pledged by the government. [ID:nLP725712]

As manoeuvring intensifies ahead of the G20 summit on an economic action plan, China appeared to side with Washington as Finance Minister Xie Xuren said countries should increase their economic stimulus plans if necessary to boost market confidence.

A senior IMF official warned the world economy will not start its recovery as expected in 2010 if countries withdraw fiscal stimulus too soon. [ID:nN25450709]

But Jean-Claude Juncker, who chairs the group representing euro zone finance ministers, again rejected Obama's appeal on Tuesday for leading economies to spend more in concerted action.

"The European stimulus plans are strong, they are demanding and they are significant in terms of volume and quality," he told Europe 1 radio. "There is no (possibility) that, upon the demand of the United States, that we would increase it." [ID:nLP260984] (Reporting by Reuters bureaus worldwide; Writing by Tomasz Janowski; Editing by Jean Yoon) ((tomasz.janowski@thomsonreuters.com; +65 6870 3854; Reuters Messaging: tomasz.janowski.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) ($1=.7355 Euro) Keywords: FINANCIAL/

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Nokia says has stopped using phone subcontractors

HELSINKI, March 26 (Reuters) - Nokia <NOK1V.HE>, the world's top cell phone maker, has stopped using subcontractors in the assembly of its phones due to the faltering demand for mobile handsets, a spokeswoman for the company said on Thursday.

"In engine making we have fully stopped (using subcontractors)," said a spokeswoman for the company.

In 2008 Nokia outsourced approximately 17 percent of manufacturing volume of mobile phone engines, which include the phone and software that enable its basic operations.

Nokia's key subcontractors have been Foxconn <2038.HK>, China's BYD <1211.HK>, Jabil Circuit <JBL.N> and Elcoteq <ELQAV.HE>.

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Chinalife conservative in 2009 investment strategy

By Xie Heng and Sui-Lee Wee

BEIJING/HONG KONG, March 26 (Reuters) - China Life Insurance Co <2628.HK>, the world's top life insurer by market value, said on Thursday it will be conservative in its investment strategy this year, after seeing its 2008 profit plunge during the global market turmoil.

China Life <601628.SS> said it will invest mostly in fixed income products this year, while taking a conservative stance toward equities, according to a written announcement handed out at a briefing to discuss its 2008 results.

Fixed income products include bonds and certificates of deposits, and are typically less volatile but offer lower rates of return over the long term compared with stocks.

Many insurance companies posted major losses from their stock investments over the last year, as major global stock markets lost about half of their value from their 2008 highs during the global financial crisis. On Wednesday, China Life posted a 42 percent drop in fourth-quarter net profit on a slump in the stock market and a large number of claims due to disasters. For a story on the company's results, click: [ID:nSHA339058].

China Life also said it will actively seek overseas acquisition and investment opportunities this year, but will take a proactive and prudent approach to such purchases. Alex Tang, research director with Core Pacific-Yamaichi International, called the company's broader investment strategy too conservative.

"As a major Chinese company with strong financial backing, it should take the opportunity and to take a more aggressive approach in looking for M&A opportunities in a bear market," he said. "The company should put more effort in reviewing its investment strategy and should put more effort in identifying market trends."

China Life and smaller rival China Ping An Insurance (Group) Co <2318.HK><601318.SS> suffered from a collapse in investment returns last year as the country's benchmark Shanghai Composite Index <.SSEC> tumbled nearly 70 percent.

Chinese stocks have rebounded 24 percent this year, fuelled by the government's 4 trillion yuan ($585.6 billion) stimulus plan, monetary easing policies and signs of an economic recovery.

However, China Life and other domestic insurers face pressure on their bond investments, after China's five rate cuts in the second half of last year pushed down fixed-income yields, analysts have said.

Combined insurance premiums at China's big three life insurers in February continued to grow, but at a slower pace compared with the previous month, the official Shanghai Securities News reported on March 10.

Total premiums at China Life Insurance <601628.SS>, the life insurance arm of Ping An Insurance (Group) Co and China Pacific Insurance (Group) Co <601601.SS> rose 5 percent on the year to 46.7 billion yuan ($6.8 billion), the paper quoted unnamed sources as saying.

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China's Currency Proposal Gets Respect, and Questions

U.S. officials don’t seem to think much of People’s Bank of China governor Zhou Xiaochuan’s proposal for a new “super-sovereign” reserve currency. But some serious people are taking it seriously, despite the obvious impediments to making it happen — and not all of them work for the IMF.

Mr. Zhou’s proposal “has the potential to lead to one of the most profound reforms of the global monetary system in the coming decades,” Deutsche Bank China economist Jun Ma wrote in a report Wednesday. He endorsed the analysis behind China’s proposal, arguing that the status of the U.S. dollar as a reserve currency enabled the country’s excessive borrowing and helped contribute to the U.S. real estate bubble.

He said the idea of a super-sovereign reserve currency deserves serious consideration as it is “a possible solution that can help end the huge bilateral imbalances between China and the US in the long run.” Mr. Ma concedes that the technical barriers to implementing the idea are enormous, but says the idea could slowly gain support from both developing nations and some rich countries.

Other observers are surprised and somewhat suspicious of China’s newfound interest in a global reserve currency controlled by the IMF, since the People’s Bank of China often seems to have more feeling for its own currency.

“Events on the ground suggest the PBOC is more actively promoting the [yuan] itself as a reserve currency,” Royal Bank of Scotland economist Ben Simpfendorfer said in a report, pointing to its recent currency-swap agreements with Hong Kong, Malaysia, Indonesia and Belarus.

Those deals imply the central bank is trying to move toward settling some trade in yuan rather than dollars, he said, which could be a way to shield CHina’s exporters from the recent big moves in the exchange rates of the U.S. dollar and euro. The yuan is unlikely to end up as a global reserve currency but could gradually see more use regionally, perhaps becoming a sort of de-facto Asian monetary unit, Mr. Simpfendorfer said.

Either way, it’s pretty clear China would prefer that the reserve currency of the future be something other than the dollar.

–Andrew Batson

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PetroChina Profit Drops; Output Curbs Expected

By ARIES POON and DAVID WINNING

HONG KONG -- PetroChina Co. said oil-price volatility and soaring costs drove its net profit down 22% last year, its first fall in annual earnings since 2001.

This year, PetroChina, China's largest listed oil producer by output, says it confronts "a complex and volatile external environment" as China's economy slows and domestic demand for petrochemical products shrinks.

Industrial activity in China is stagnating as export orders to the U.S. and Europe thin out, hitting oil demand because fewer trucks are needed to deliver goods to market and as oil-fired power plants reduce capacity.

The International Energy Agency recently forecast that China's oil-demand growth in 2009 would be the slowest in nearly 20 years, with diesel demand particularly weak.

PetroChina expects to cut crude-oil output 4.3% this year and refinery runs 1.4% in response to weakening domestic demand. But PetroChina predicts it will keep capital spending at last year's level of 232.2 billion yuan ($34 billion).

PetroChina President Zhou Jiping said Beijing's move to raise price ceilings for gasoline and diesel by 3% to 5% in response to higher global oil prices would lift the company's monthly revenue by 1.26 billion yuan.

Full-year net profit was 114.43 billion yuan, down from 146.75 billion yuan in 2007. Revenue rose 28% to 1.071 trillion yuan from 836.35 billion yuan.

A key reason for the profit fall was a 40.63 billion yuan increase in the windfall taxes paid to the government on oil sales. The tax kicks in whenever oil prices rise above $40 a barrel, and PetroChina said its average selling price in 2008 was $87.55 a barrel, up 34% from 2007.

Earnings were also squeezed by operating losses in its refining-and-marketing arm and chemical business. Operating losses on refining widened to 82.97 billion yuan from 20.68 billion yuan, as PetroChina wasn't able to pass on the cost of rising crude-oil prices in full to consumers because of the government's previous system of strictly capping refined-product prices.

Write to Aries Poon at aries.poon@dowjones.com and David Winning at david.winning@dowjones.com

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American Express may sell ICBC; Goldman Sachs to hold on

NEW YORK, March 25 (Reuters) - American Express Co <AXP.N> said it may sell its stake in Industrial and Commercial Bank of China <1398.HK> <601398.SS>, worth more than $600 million, while Goldman Sachs <GS.N> may sell up to 20 percent of its stake in the Chinese bank.

The announcements come as U.S. financial institutions face renewed pressure to reduce their risk and shore up their balance sheets.

American Express, the fourth-largest U.S. credit card issuer, and Goldman Sachs, the fifth-largest U.S. bank, have recorded massive drops in profits as credit losses and writedowns have surged.

Goldman Vice Chairman Michael Evans, who appeared at ICBC's 2008 earnings media conference in Beijing, said the Wall Street firm does not need to raise cash and would not use the partial sale of its ICBC stake to repay funds it owes to the U.S. government.

"Goldman Sachs does not need to raise cash as a firm," Evans said.

Reports in U.S. newspapers earlier this week said Goldman was looking to sell part of its ICBC stake as soon as next month.

Goldman said it agreed to hold onto at least 80 percent of its stake through April 28, 2010, leaving it free to sell up to 20 percent.

Prior to the new agreement, Goldman would have been eligible to sell half its ICBC shares on April 28, 2009, and the other half on Oct. 20, 2009.

Goldman's investment in ICBC, including stakes held by Goldman-managed investment funds, is worth about $8.75 billion and amounts to 4.93 percent of the Chinese bank's stock.

American Express' holding represents 0.38 percent of ICBC's outstanding shares. American Express can sell half its shares on April 28 and the other half on Oct. 20, 2009. The credit card company said it will consider selling its stake at some point after the lockup period, depending on market conditions. American Express will look to minimize the market impact and maximize proceeds from the sale, potentially through a private deal with investors.

ICBC and American Express intend to continue their partnership, they said.

Goldman, German insurer Allianz <ALVG.DE> and American Express invested $3.78 billion in ICBC in 2006, giving the consortium a total stake of about 9 percent. (Reporting by Dan Wilchins, editing by Maureen Bavdek and John Wallace) ((Reuters Messaging: dan.wilchins.reuters.com@reuters.net; +1 646 223 6320)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134

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ICBC 1398

HONG KONG, March 26 (Reuters) - Shares in Industrial and Commercial Bank of China jumped 12 percent in Hong Kong on Thursday after Goldman Sachs <GS.N> pledged to extend the lockup on most of its stake in the state-run bank.

ICBC <1398.HK><601398.SS>, the world's most valuable bank, also reported flat fourth quarter net profit late on Wednesday, in line with market forecasts.

ICBC shares rose to HK$4.01 in early Thursday trade to an 11-week high after Goldman Sachs said it would not sell 80 percent of its nearly 5 percent holding in ICBC before April 2010. Previously it could sell half the stake next month and the other half in October.

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ZTE says sees strong interest in vendor financing

LONDON, March 25 (Reuters) - Chinese telecoms equipment and phone maker ZTE <0763.HK><000063.SZ> has seen interest from several carriers for vendor financing made possible by a $15 billion credit line from China Development Bank, it said.

"We are talking to several operators about such cooperation," Lin Cheng, head of the company's western European operations told a news conference in London on Wednesday.

He declined to say who they were or whether they were new customers but said they were talking about projects worth between $100 million and $1 billion in Europe and elsewhere.

Vendor financing is when a company lends money to a customer so that the customer can buy its products.

ZTE announced last week it had obtained the credit line for five years, meant to help the company to strengthen its global position, including through financing overseas projects.

The telecom market has seen cut-throat competition for new business during the past few years, partly driven by Chinese vendors such as Huawei [HWT.UL] and ZTE, which almost doubled its share of the telecoms-gear market in 2008 to 5 percent.

ZTE also expects healthy growth in its handsets business this year. Currently the world's sixth-biggest handset maker, it wants to enter the top three in five years' time.

The company is strong in low-cost phones and is also expanding into smartphones based on Microsoft's <MSFT.O> Windows Mobile and open-source Linux, but not the Symbian platform recently opened up by Nokia <NOK1V.HE>. Lin said Symbian was still too complicated.

He said ZTE was talking to Google <GOOG.O> about making a phone based on the Web giant's Android operating system but had no agreement to do so yet.

ZTE launched a new phone jointly with Deutsche Telekom's <DTEGn.DE> T-Mobile UK for the first time on Wednesday. The Vairy is a pay-as-you-go touch-screen handset that will sell for 59.99 pounds ($87.30).

Like most of ZTE's phones, the handset will carry the operator's brand rather than its own. Lin said ZTE did not yet feel Europe was ready for ZTE-branded phones.

"We have to test the water in Europe," he said. "We cannot come here with, you know, the Chinese Kung Fu man."

Lin added that a solar-powered phone that ZTE unveiled at Mobile World Congress in Barcelona last month, which is aimed at rural communities in Africa, would sell for about $40 to $50.

ZTE made 61 percent of its sales outside China last year, and says it won about 30 percent of the Chinese third-generation market in recent 3G tender bids offered by China's three largest telecom operators.

Asked about possible interest in buying assets from Canadian telecoms gear maker Nortel <NT.TO>, which has filed for bankruptcy protection, Lin said he agreed with ZTE's chief executive that there would be no reason to do so.

"The pricing is not expensive, but if it does not increase our efficiencies, why should we?," he asked. (Reporting by Georgina Prodhan; Editing by Erica Billingham) ((georgina.prodhan@thomsonreuters.com; +4420 7542 7954; Reuters Messaging georgina.prodhan.reuters.com@reuters.net)) ($1=.6871 Pound)

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Bank of China Profit Falls 59%

Fourth-Quarter Drop Shows How Dismal Global Investment Affects the Nation's Big Lenders

SHANGHAI -- Bank of China Ltd. posted a 59% slump in fourth-quarter net profit as its overseas investments were hit by the global financial turmoil.

Associated Press

President Li Lihui said the bank's purchase of a 20% stake in Cie. Financiere Edmond de Rothschild will likely be approved by Chinese regulators soon.

Full-year profit at the smallest of China's Big Four banks rose 14%, but the drop at the end of the year, after a 32% gain in the first nine months, gave an indication of how the weakening domestic economy and a deteriorating global investment climate are affecting Chinese banks.

Despite the setback, the bank said expanding beyond its home market remains key to its development strategy.

The state-run bank said 2009 will likely be tougher for it because of the slowdown in the domestic economy and its exposure to overseas markets.

Bank of China, which has the biggest investment in U.S. subprime securities of all Asian financial institutions at $2.59 billion, said it had set aside $2.25 billion to cover potential investment losses at the end of last year.

Reuters

President Li Lihui said the bank's purchase of a 20% stake in the French private bank Cie. Financière Edmond de Rothschild will likely be approved by Chinese regulators soon.

The original Dec. 31 deadline to complete the deal passed without a blessing from authorities in China, so Bank of China has extended the cutoff to March 31. Analysts said Beijing hasn't approved the purchase because of concerns about investment risks amid global financial volatility, though they said a deal with Rothschild could provide Bank of China expertise in asset management as well as distribution in Europe.

The bank's fourth-quarter net profit fell to 4.42 billion yuan ($646.8 million) from 10.77 billion yuan a year earlier.

Net profit for the full year rose to 64.36 billion yuan from 56.25 billion yuan in 2007.

The 14% full-year gain lagged the 40% rise in net profit at Bank of Communications Co. because of Bank of China's larger exposure to overseas assets.

Royal Bank of Scotland Group PLC and UBS AG have both sold their stakes in Bank of China in recent months, removing an overhang on the Chinese lender's stock.

Hong Kong-listed shares of Bank of China have gained 12% since the start of the year, beating the 6.4% rise in China Construction Bank Corp. Stock in Industrial & Commercial Bank of China Ltd. has fallen by 13%.

China's $200 billion sovereign-wealth fund marginally increased its stake in the state-run bank to 67.52% at the end of last year. Singapore's Temasek Holdings owns a 4.13% stake in Bank of China.

—Rose Yu, Amy Or and Aries Poon

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Untitled

HONG KONG, March 25 (Reuters) - PetroChina Co Ltd <0857.HK> <PTR.N> <601857.SS>, Asia's top oil and gas producer, posted a 39 percent drop in fourth-quarter net profit, hit by asset writedowns amid a sharp drop in crude oil prices.

PetroChina, the world's second-largest oil company by market value after Exxon Mobil <XOM.N>, said October-December net profit fell to 20.9 billion yuan ($3 billion) from a restated 34.25 billion yuan a year earlier.

The result, calculated from previously reported quarterly earnings, lagged a consensus forecast for 33.1 billion yuan from 20 analysts polled by Reuters.

For the full year, PetroChina reported a net profit of 114.43 billion yuan. The oil giant posted earnings per share of 0.63 yuan, down from 0.82 yuan a year ago.

The company said its total oil and gas output in 2008 rose 5.7 percent from the previous year.

PetroChina is the latest energy producer to feel the pain from the collapse in crude prices <CLc1>, which have tumbled by two-thirds from a record near $150 a barrel last July.

International oil majors including BP Plc <BP.L> and Royal Dutch Shell <RDSa.L> have posted lower fourth-quarter profits.

PetroChina shares fell 15 percent in October-December, a little less than top Asian oil refiner Sinopec's <0386.HK> 22 percent drop and a 20 percent fall on the benchmark Hang Seng Index <.HSI>. (Reporting by Sui-Lee Wee; Editing by Jacqueline Wong)

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Wednesday, March 25, 2009

PetroChina Q$ Falls 39 pct on drop in oil pricess

The result, calculated from previously reported quarterly earnings, lagged a consensus forecast for 33.1 billion yuan from 20 analysts polled by Reuters.

For the full year, PetroChina reported a net profit of 114.43 billion yuan. The oil giant posted earnings per share of 0.63 yuan, down from 0.82 yuan a year ago.

The company said its total oil and gas output in 2008 rose 5.7 percent from the previous year.

PetroChina is the latest energy producer to feel the pain from the collapse in crude prices <CLc1>, which have tumbled by two-thirds from a record near $150 a barrel last July.

International oil majors including BP Plc <BP.L> and Royal Dutch Shell <RDSa.L> have posted lower fourth-quarter profits.

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Volcker: China Chose to Buy Dollars

When talk at the Journal’s Future of Finance Initiative turned to inflation, participants turned the resident expert: Paul Volcker. He had a lot to say.

Paul Morse for The Wall Street Journal

Paul Volcker at the Wall Street Journal’s Future of Finance Initiative in Washington, D.C.

The former Federal Reserve chairman touched on a number of subjects ranging from the Fed’s communication strategy to China’s concerns about the U.S. debt load. The latter sparked questions over whether the U.S. could default on its debt — it effectively had done that at least once, Yale professor Robert Shiller noted. When President Roosevelt took the U.S. off the gold standard and unilaterally devalued the dollar, the move wiped out some 75% of dollar-denominated debt. “Maybe I shouldn’t even mention this,” Shiller joked.

Volcker, who as head of the White House’s Economic Recovery Advisory Board is a key adviser to President Obama, expressed concerns about inflation as a way of dealing with mounting debt. “One historic way of getting yourself out of this situation — or trying to — is to inflate. Either you do it deliberately or you allow it to happen,” he said. “And if we permit that to happen then I think all these dollars will come tumbling down on us.” He said the U.S.’s greatest strength is its history and reputation, and suggested that shouldn’t be put at risk.

He also critiqued the Fed. “I get a little nervous when I see the Federal Reserve announcements that they want have the amount of inflation that’s conducive to recovery,” Volcker said. “I don’t know what ‘the amount of inflation that’s conducive to recovery’ would be appropriate. I’d much rather they say that they want to maintain stability in the currency, which is conducive to confidence and recovery.”

As for China’s criticism of the U.S., Volcker was unsympathetic. “I think the Chinese are a little disingenuous to say, ‘Now isn’t it so bad that we hold all these dollars.’ They hold all these dollars because they chose to buy the dollars, and they didn’t want to sell the dollars because they didn’t want to depreciate their currency. It was a very simple calculation on their part, so they shouldn’t come around blaming it all on us.”

The 81-year-old elder statesman commented on the current state of the U.S. economy: “We’re in a government-dependent financial system; I never thought I would live to see the day… We’ve got to fight to get away from that.”

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China says Coca-Cola could have abused juice deal

BEIJING, March 25 (Reuters) - China rejected Coca-Cola's <KO.N> bid to buy top local juice maker Huiyuan <1886.HK> because it feared the U.S. multinational could abuse its position across the whole soft drinks market, an official said in remarks published on Wednesday.

Ministry of Commerce spokesman Yao Jian said regulators treated carbonated soft drinks and juice beverages as a conjoined sector -- one, he said, in which Coca-Cola could deter competitors to the detriment of consumers.

Yao fleshed out the ministry's rationale for rejecting the bid last week in an interview in the official People's Daily.

"Potential competitors would find it very difficult to enter this market and grow into substantive competitors against Coca-Cola and thereby eradicate or restrict the possibility of Coca-Cola engaging in abusive conduct," Yao said.

Multinational investment could be a boon for China's economy, Yao said, adding a broad caveat.

"If mergers and acquisitions lead to multinational companies gaining or enhancing dominant status, producing exclusionary and competition-restricting outcomes, this will hinder economic development," he said.

China rejected the proposed deal under an anti-monopoly law enacted last year, stating that the combined concentration of the two companies would have hurt competition in the juice business.

Huiyuan controls over a tenth of the Chinese fruit and vegetable juice market, which grew 15 percent last year to $2 billion. Coca-Cola has a 9.7 percent market share. Huiyuan is listed in Hong Kong and registered in the Cayman Islands.

The decision to block the deal drew criticism from trade lawyers and economists who said China appeared willing to wield its anti-monopoly law to fend off foreign attempts to buy promising domestic firms, even when resulting market concentration would not be excessive.

But Yao said "nationalist sentiment" was not a factor.

He said Coca-Cola already had market dominance in the carbonated drinks sector, citing local industry association estimates that it holds 60.6 percent of the market. It could have leveraged that influence in the juice sector, he added.

"Although there is not strong substitutability between the carbonated beverage and juice beverage markets," Yao said, "both are non-alcoholic drinks and belong to two closely intertwined markets."

Coca-Cola, he said, could have used its position to "transfer its dominance of the carbonate beverage market to the juice beverage market". (Reporting by Chris Buckley; Editing by Nick Macfie) ((chris.buckley@reuters.com; +86-10-66271261)) ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com)) Keywords: CHINA COKE/M&A

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BOC Hongkong 2008 net profit down 78.4 pct

    March 24 (Reuters) - Year ended December 31, 2008
   (in million HK$ unless stated)
   Shr (H.K. cents)         31.62  vs 146.09
   Final Div (H.K. cents)   nil    vs 48.7
   Net                      3,343  vs 15,446
   Net interest income      20,157 vs 19,395
   Company name             BOC Hong Kong (Holdings) Ltd.
   Books close              May 15-21
   NOTE - BOC Hong Kong <2388.HK>, a unit of state giant Bank of
China, is Hong Kong's second-largest lender by assets after HSBC
<0005.HK> <HSBA.L>.
   The calculation of share earnings is based on the weighted
average of 10,572.78 million shares in issue during the two
years.
   Total dividend for the year is 43.8 H.K. cents (including
interim dividend of 43.8 cents) vs 91.5 cents.
   The consensus (mean) forecast, according to a poll by Reuters
Estimates, was for net profit of HK$6.31 billion for the year.
(Reporting by Raymond Leung; Editing by Jacqueline Wong)
((raymond.leung@thomsonreuters.com; +852 2843 6368; Reuters
Messaging: raymond.leung.reuters.com@reuters.net))
Keywords: BOCHONGKONG RESULTS/TABLE

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Bank of China profit hit by overseas exposure

* Q4 net drops on overseas assets, HK exposure

* Hong Kong unit posts second-half loss

* Books $4.46 bln allowance against U.S. mortgage securities

(Adds quotes from company, analyst in paragraphs 7-9)

By Tony Munroe

HONG KONG, March 24 (Reuters) - Bank of China <3988.HK>, the country's largest foreign exchange lender, reported a 58 percent drop in fourth-quarter earnings, weighed down by its overseas assets and exposure to recession-hit Hong Kong.

Bank of China and other mainland banks are expected to face margin pressure and higher credit costs this year, with industry watchers also predicting an increase in soured loans as slowing economic growth erodes asset quality.

The state-controlled lender posted October-December net income of 4.5 billion yuan ($659 million), lagging analysts' forecasts for 7.96 billion yuan, according to Reuters Estimates.

Full-year profit of 64.4 billion yuan was an increase of 14 percent from the 56.2 billion earned a year earlier.

Bank of China <601988.SS>, hardest-hit among mainland Chinese banks by its exposure to U.S. mortgage-related securities, booked impairment allowances against those holdings of $4.46 billion.

Overall impairment losses on assets more than doubled for the year to 45 billion yuan, but its non-performing loan ratio improved to 2.65 percent for the year from 3.12 percent.

"Our provisions increased a lot last quarter but it does not mean that the quality of our assets deteriorated. It was because we normally make most of the provisions in the fourth quarter," bank president Li Lihui told reporters.

"The low interest rate environment will continue to have an impact on our margins in 2009," he said, adding the bank was looking to buy a life insurance business.

Samuel Chen, analyst at JP Morgan, said the bank took a "kitchen sink" approach to booking provisions in the final quarter.

Bank of China's credit costs for the year rose, while net interest margins narrowed slightly to 2.63 percent from 2.76 percent.

OVERSEAS WOES

Its overseas flagship, Bank of China (Hong Kong) Ltd <2388.HK>, posted a second-half loss of HK$3.75 billion ($480 million), compared with net profit of HK$7.98 billion a year earlier. Analysts polled by Reuters Estimates had expected BOC Hong Kong to post a second-half loss of HK$552 million.

For the full year, BOC Hong Kong's earnings fell 78 percent to HK$3.34 billion, dragged down by $1.52 billion in provisions on its investments in U.S. mortgage-backed securities and a stake in Hong Kong lender Bank of East Asia <0023.HK>.

BOC Hong Kong, which is nearly two-thirds owned by Bank of China, recommended no final dividend due to the earnings hit in the second half and the need to preserve capital.

Royal Bank of Scotland said in a research note it expects that 4.5 percent of new loans made by mainland Chinese banks between 2005 and 2008 could become non-performing between the second half of 2008 and the end of 2010, higher than the 3.5 percent seen in the 2004-2005 downturn.

Mainland banks have made a flurry of new loans in recent months to support Beijing's stimulus measures to maintain economic growth at 8 percent or more.

Spared the worst of the global downturn thanks to a relatively strong domestic economy, China's three biggest listed banks -- Industrial and Commercial Bank of China <1398.HK> <601398.SS>, China Construction Bank <0939.HK><601939.SS> and Bank of China are the world's three most valuable lenders.

Bank of China has a market value of $113 billion.

Given its exposure to sluggish overseas markets, Bank of China trades at a discount to its peers at 1.26 times fourth-quarter profit, which still managed to beat analysts' forecasts.

Shares of Bank of China have risen 12 percent this year, outperforming the index for major Chinese companies listed in Hong Kong <.HSCE>, which was up 2 percent. But the stock fell 28 percent in the last quarter of 2008 against a 13 percent drop on the H-share index. (US$=6.8335 yuan = HK$7.8) (Additional reporting by Clare Jim. Editing by Ian Geoghegan and Jon Loades-Carter) (tony.munroe@thomsonreuters.com; Reuters Messaging: tony.munroe.reuters.com@reuters.net; +852 2843 6358, Fax +852 2845 0636)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

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Thursday, March 19, 2009

Analysis- Australia weighs risk of saying 'no' to Chinalco

By James Grubel

CANBERRA, March 19 (Reuters) - Diplomatic ties might take a knock if Australia rejects China's $19.5 billion investment in miner Rio Tinto Ltd/Plc, but the biggest casualty could be a planned free trade deal and the economic growth it promises.

Australia's Foreign Investment Review Board (FIRB) is reviewing a raft of Chinese investments in Australia, including the Chinalco-Rio deal. Treasurer Wayne Swan will have the final say after weighing national interests.

Swan is under growing pressure from politicians and unions to oppose the deals due to concerns that China, a major customer for Australian resources, will be able to exert influence over prices and production of mineral exports from some mines.

Foreign policy analysts said they expected Swan would approve the deals, with some conditions, because an outright rejection would lead to a diplomatic backlash from China, Australia's top trading partner, and could stall negotiations for a free trade pact.

"If the deal is turned down, there will be some negative impact to the bilateral relationship," said Australian National University Chinese investment analyst Chen Chunlai.

"But the party worst hurt would be Australia, not China," Chen said, adding that Australia is increasingly relying upon exports to China to help avert a prolonged recession.

Two-way trade between Australia and China was worth A$68 billion ($46 billion) in 2008.

A joint China-Australia analysis said a free trade deal would boost Australia's gross domestic product (GDP) by A$18 billion over 10 years, and China's by A$64 billion over the same period.

It found a free trade deal would boost Australian sales to China of cereal grains, wool, minerals and metals, while China's manufacturing, textiles, clothing and toy industries would benefit from easier access to Australian markets.

Australia's Greens, a key independent Senator and a conservative politician have all spoken out against the China investment deals, warning that Australia must not sell prized national assets to companies controlled by a foreign government.

Conservative National Party Senator Barnaby Joyce has run television ads against them, saying China would never allow Australia to buy a mine in China, which might be difficult to dispute after China's rejection this week of a bid by Coca-Cola <KO.N> to buy juice maker Huiyuan Juice <1886.HK>. [nHKG367771].

Swan will have to weigh up concerns about Chinese investment with the need to protect investment in mining projects and jobs in Australia, with unemployment set to rise as the economy slows, and with the government due to hold elections by late 2010.

The types of conditions Swan might impose could include insisting on a number of Australian directors on the board or other guarantees curbing Chinalco's influence on the company's decision making.

(For a related story on political opposition, click on [ID:nSYD288712].)

(For a related story on FIRB deliberations, click on [ID:nSYD466425].)

(For a factbox on FIRB rules and issues, click on [ID:nSP337641].)

CHINA'S RISING POWER

State-owned Chinalco, China's top aluminium maker, wants to pay $12.3 billion for stakes in Rio's key iron ore, copper and aluminium assets and $7.2 billion for convertible notes that would double its equity interest in Rio to 18 percent.

The FIRB is also examining two other Chinese investments in miners: Minmetals' <1208.HK> $1.7 billion rescue bid for OZ Minerals Ltd <OZL.AX> and Hunan Valin Iron and Steel Group's $768 million plan to buy a 16.5 percent stake in iron ore miner Fortescue Metals Group <FMG.AX>.

If the Chinalco deal fails, Rio Tinto would need to speed up asset sales or find some other way to refinance $39 billion in debt, possibly with a steeply discounted rights issue.

Investors worried that the deal will not proceed have sent Rio's shares down 13 percent over the past two days.

Australia generally welcomes foreign investment, with FIRB decisions based mainly on business considerations. But growing investment from state-owned Chinese firms has added a new foreign policy dimension to the decisions.

Mark Thirwell, international economy director at the respected Lowy Institute foreign policy think-tank, said the rise of China as a major economic power raised new questions about Australia's trade and strategic outlook.

Previously, Australia's major trading partners -- Japan, the United States and Britain -- have also been Australia's key allies. Not only is China outside that club of traditional allies, it is also a a strategic competitor to both Japan and the United States.

"This is not just an economic or business decision. It really is entangled with the importance of the bilateral relationship and how countries like Australia and others respond to China's rising economic power," Thirwell told Reuters.

A poll by the Lowy Institute in 2008 found 85 percent strongly supported more strict investment regulation on companies which are controlled by foreign governments.

Thirwell said world leaders could not talk about international cooperation to fight the global financial crisis, and at the same time shun investment from China.

"China will become a more important player in the Australian economy, it will become a bigger investor. We need to get used to that. An outright 'no', and panic about that is not the way to go," Thirwell said.

($1=A$1.48) (Editing by John Chalmers)

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major banks slash growth SE Asian

SINGAPORE, March 19 (Reuters) - Major investment banks slashed growth forecasts for Southeast Asian economies, with one predicting an 8 percent contraction in Singapore, as the weakening global economy hits the region's key export industry.

Goldman Sachs now expects Singapore's gross domestic product to fall 8 percent this year from a previous forecast for a 4 percent contraction hurt also by a slowing real estate market and shrinking investment.

It also cut its GDP forecasts for 2009 for four other Southeast Asian economies. Among them, its sharpest downward revision was for Malaysia to shrink 3.5 percent from growth of 1.7 percent previously, while it saw Thai GDP slipping 4 percent from a 0.8 percent drop previously.

Indonesia's economy was expected to grow at a slower pace of 2.5 percent from 3.0 percent previously, and the Philippine economy was expected to shrink 0.5 percent from a growth forecast of 1.8 percent previously, Goldman said in a note on Thursday.

"We reiterate our view that Singapore has one of the highest exposures to weakness in external demand, because of its high ratio of exports to GDP and the high portion of exports-driven domestic demand," it said.

HSBC lowered growth forecasts for Singapore to -7 percent and for Malaysia to -3.5 percent, from -5 percent and +0.5 percent previously.

Credit Suisse saw a 6.5 percent contraction for Singapore, a 5.2 percent contraction for Japan as frozen trade hits exporters, but 8 percent growth for China given its policy stimulus.

Goldman's forecast on Singapore is the most bearish among private economists, although Singapore's most powerful politician, Lee Kuan Yew, told a Reuters seminar earlier this month the economy could contract by as much as 10 percent in 2009 if exports continued to slide in the second quarter.

A poll of analysts by Reuters on Wednesday [ID:nBKK465713] put the average forecast for Singapore at a 4.9 percent contraction <SGGDP1>, in line with the government's official forecast and a survey of economists by the central bank.

Goldman saw the Singapore dollar <SGD=> at 1.64 to the U.S dollar within 3 months while HSBC expected a 2-3 percent one-off shift downwards in the band, with scope to ease policy again. (Reporting by Nopporn Wong-Anan; Editing by Neil Chatterjee & Kazunori Takada) ((nopporn.wong-anan@reuters.com; +65 6403 5677) Keywords: SINGAPORE ECONOMY/GOLDMAN

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Tuesday, March 17, 2009

Wen's Dollar Warning

THE WALL STREET JOURNAL ASIA

Chinese Premier Wen Jiabao said Friday that he has "worried" about the safety of U.S. assets -- meaning the Treasury bonds his government owns. Whatever Mr. Wen's political motives, his concerns about the integrity of U.S. sovereign debt are timely and apt.

U.S. debt held by the public has now hit $6.6 trillion -- up from $5.3 trillion only a year ago. That doesn't count the $5.2 trillion or so in outstanding Fannie Mae and Freddie Mac liabilities that we now know also have a taxpayer guarantee. And it doesn't count the many ways that both the Federal Reserve and Treasury have guaranteed financial assets more broadly -- such as $29 billion in Bear Stearns paper, $301 billion in dodgy Citigroup assets, and hundreds of billions in Federal Housing Administration loans.

Wen Jiabao

President Obama's stimulus plan and new budget will require an additional $3 trillion to $4 trillion in new borrowing over the next two or three years, and that's if the economy recovers smartly. Adding it all up, Federal Reserve Chairman Ben Bernanke earlier this month estimated that U.S. public debt-to-GDP would reach 60% over the next few years, up from 40% before the financial panic hit -- and the highest level since the aftermath of World War II.

That's a lot of T-bills to flog, and the world is taking note. Our colleagues at MarketWatch reported last week that the cost to buy insurance against U.S. sovereign debt default has surged in the past year. The spreads on credit default swaps for U.S. government debt hit 97 basis points last week -- or $97,000 to buy insurance on $10 million in debt -- nearly seven times higher than a year ago and 60% higher than the end of 2008.

Mr. Wen called on the U.S. to "maintain its credibility, honor its commitments and guarantee the safety of Chinese assets." Little wonder: China, like other trading nations, has a big stake in this fiscal free-for-all. Although it doesn't release detailed data, roughly two-thirds of Beijing's $1.9 trillion foreign-exchange reserves are likely parked in U.S. Treasury debt.

The Obama Administration revealed its sensitivity on the issue by responding quickly, with Presidential spokesman Robert Gibbs saying Friday "there's no safer investment in the world than in the United States." Mr. Obama added Saturday that "not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States."

The White House is almost certainly right that the U.S. won't default; the consequences would be too dire. But there are risks well short of formal debt repudiation. As the supply of U.S. debt increases, investors may demand a higher yield and interest rates would rise, reducing the tradeable value of current Treasury bonds. The other temptation will be to inflate away the debt, which would also devalue dollar-denominated assets.

What Mr. Wen is really saying is that even the U.S. national balance sheet has limits. The dollar is the world's reserve currency, so the U.S. has the rare privilege among nations of being able to borrow (and then repay its debts) in its own currency. America also remains the world's main safe haven in a crisis, as the flight to the dollar and T-bills in recent months underscores.

But reserve currency status isn't a birthright and it can vanish when nations are irresponsible for too long. Deficit spending has its uses when the money is spent on winning a war or to finance tax cuts and investments that promote economic growth. The tragedy of Mr. Obama's $787 billion "stimulus" and his $410 billion 2009 spending blowout is that they spend principally on income maintenance and transfer payments that have little or no growth payback.

Mr. Wen may have been trying to placate his domestic Chinese audience, which is suffering through its own economic slowdown. Or perhaps he was trying to repay Treasury Secretary Timothy Geithner for his nomination-hearing comments on Chinese currency "manipulation." Mr. Wen doesn't have much room to lecture the U.S., having done too little in his six years in office to liberalize the Chinese economy.

But the Chinese Premier is right to warn the U.S. political class that the global demand for American debt will continue only if the U.S. runs economic policies that make U.S.-dollar assets worth the risk.

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FRASERS CENTREPOINT TRUST (J69U)

 -- FRASERS CENTREPOINT TRUST <FCRT.SI> 
    - Real estate investment trust Frasers Centrepoint said 
Moody's confirmed its Baa1 rating on the company, with a negative 
outlook.[ID:nSN3G31041]

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Preventing the Next Fire While This One Blazes

By DAVID WESSEL

When firefighters are still struggling to extinguish the blaze, talking about fire prevention seems premature. The worst financial crisis since the Depression isn't over, yet it's time to put the best brains to work at reconstructing the financial regulatory structure so we don't go through this again.

Real Time Econ: Officials' Thoughts on Regulation

Capital Journal columnist David Wessel argues that the government has big questions to answer about reconstructing the financial regulatory structure.

Trying to wait until the fire is out will yield one of two bad outcomes: a simple-minded, myopic rush to regulation that will make the financial system no safer and the world economy worse off, or talk about "reform" that fades into inaction. Beginning the renovation of regulation will help speed the end of this painful episode. As Barney Frank, chairman of the House Financial Services Committee, puts it: "People...aren't going to go back into the water until we tell them we've killed most of the sharks."

Preventing all future crises is not the goal. That would be the equivalent of banning stoves and furnaces: We'd have fewer destructive fires but we'd be cold and miserable. The goal is to prevent mishaps from burning down the world economy. Here are three of the threshold questions that need pondering:

Who shall be saved, and who shall be allowed to die?

The policy of the U.S. government is that no large, interconnected financial firm can be allowed to fail because such failures threaten the broader economy. Main Street banks that take deposits are no longer the only "systemically important" institutions. Now, brokerage firms such as Bear Stearns and insurers like American International Group are too big or too intertwined with the economy to fail.

The government must draw a circle to identify which firms or kinds of firms will be saved. No more sleep-deprived government officials making case-by-case decisions on Sunday nights.

What about big hedge funds? Private-equity houses? Huge pension funds? The circle can't be drawn in indelible ink. Institutions and markets keep evolving. And firms inside the circle must pay for taxpayer-provided protection in fees (akin to the premium for deposit insurance that banks pay) or through rules that force them to hold more capital, borrow less readily or keep more cash on hand for emergencies (which means lower profits). Otherwise, investors will make risky loans to these outfits, knowing the taxpayers will bail them out. But make the charge for being "systemically important" too onerous, and big bucks and smart people will move just to the outside of the circle -- and we'll be back where we started.

How paternalistic should regulation be, and who should be the parent?

The problem wasn't only that the U.S. wasn't tough enough on Citigroup or that the U.K. mishandled mortgage lender Northern Rock. "The far bigger failure -- shared by bankers, regulators, central banks, finance ministers and academics across the world -- was the failure to identify that the whole system was fraught with market-wide risk," the head of Britain's Financial Services Authority, Adair Turner, said this year. "We failed to put together the jigsaw puzzle." So there's an emerging consensus that every country needs an overarching guardian of financial stability.

But anointing a financial-stability guardian is like sending a lone chaperone on a camping trip with a busload of teenagers: Technically someone has supervision but likely won't prevent hanky-panky. The danger is that all we do is identify an agency to take the blame when the next crisis arrives. Hence the reluctance of some inside the Federal Reserve, the leading candidate for this role in the U.S., to take the job, a reluctance matched only by the Fed's conviction that only it can possibly do the job.

Nonetheless, we're going to get a guardian, and that's better than the status quo. The question is how much power to give it. The easy answer: enough to protect the system but not so much that it micromanages business executives or consumers who may choose to take prudent risks. The harder question is whether to give the guardian enough clout to, say, impose rules on borrowing when everyone is getting too giddy or to ban particularly risky strains of loans. Or whether, instead, the guardian should be the Paul Revere of the financial system, limited to shouting warnings.

Can we install air bags in the financial system that deploy automatically?

Today's mess reflects the failure of every check on the system, from credit-rating firms to central bankers. But just as maddening are rules that encouraged and sometimes forced banks to do things that are hurting the rest of us now. That's dumb.

A bank that wanted to set aside extra reserves in good times, for instance, was blocked by accountants who deemed that to be improper "earnings smoothing." So it's time to choose between accounting rules that aspire to a Platonic ideal of truth and rules that foster stable markets and a better economy. The rules that govern the size of banks' capital cushions prompt them to raise capital at unpropitious moments like today after they've taken big losses instead of prodding them to build bigger cushions in good times. That shows the wisdom of proposals to create a new kind of bank debt that automatically converts to equity capital, triggered either by financial ratios set in advance or by government declaration of "unusual and exigent circumstances," to borrow a phrase from the Federal Reserve Act.

Getting all this right is crucial. As the reaction to the Depression proves, the changes will be far-reaching and long-lasting.

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Wednesday, March 11, 2009

Malaysia Stimulus tops $16 Billion

Malaysia Stimulus Tops $16 Billion

State Strains Budget to Shield Economy From Global Downturn

By ELFFIE CHEW

KUALA LUMPUR -- Malaysia's government Tuesday unveiled a 60 billion ringgit ($16.26 billion) economic-stimulus plan that will strain government finances in an effort to shield the economy from the global downturn.

The plan -- larger than expected and the biggest economic stimulus initiative Malaysia has ever taken -- amounts to 9% of gross domestic product and will drive the fiscal deficit to 7.6% of GDP this year. It will be implemented during 2009 and 2010, Finance Minister Najib Razak said.

The plan follows seven billion ringgit in stimulus steps announced in November and complements efforts by the central bank to support the economy. Bank Negara has cut policy interest rates a total of 1.5 percentage points in three policy moves since November.

Yeah Kim Leng, chief economist at Kuala Lumpur-based rating agency RAM Holdings Bhd., said the new spending will help boost confidence as it focuses on curbing unemployment and helping distressed companies affected by the downturn in exports.

"The plan should help cushion the negative effects from the deteriorating global conditions and prevent the local economy from spiraling downwards," Mr. Yeah said.

The program will include 15 billion ringgit in fiscal spending and 25 billion ringgit in so-called guaranteed funds. The government also will make 10 billion ringgit in equity investments, and plans 10 billion ringgit of other measures including tax breaks.

Malaysia, a major producer of palm oil and rubber, is taking these steps amid a climate of falling commodity prices. Its electronics industry has been hit hard by declining global demand, hammering the country's exports.

Mr. Najib, who also is deputy prime minister, said the economy could register anywhere between a 1% contraction and 1% growth in 2009. The government had previously forecast a 3.5% GDP increase but Mr. Najib said it was now trimming it back "due to the deteriorating global economy."

Kuala Lumpur-based CIMB Bank's Chief Economist Lee Heng Guie said the only disappointment in Tuesday's package was that it didn't contain tax cuts for companies or consumers.

Robert Prior-Wandesforde, a Singapore-based economist at HSBC Bank, said the measures are too late to provide much support to growth in the first half of the year when the economic pain will be at its peak. But they will start to kick in just as the central bank's rate cuts begin to work and possibly as China's slowing economy regains its footing, helping support regional trading partners such as Malaysia, he said.

Malaysia had forecast a 4.8% budget deficit for this year before unveiling these new measures, which will involve large amounts of public debt to pay for the excess outlays over revenue.

Higher public borrowing often tends to push up market interest rates, making it more expensive for private companies to raise funds or access the bond market. But Mr. Najib played down the impact of the aggressive plans, saying that "financing of the deficit will not crowd out the private sector."

He said "there is ample liquidity in the domestic financial system" to absorb a pumped-up level of sovereign debt. He also said conditions in the economy could get worse.

Mr. Najib predicted unemployment would hit 4.5% this year, higher than the 3.7% registered in 2008. He also said he expects foreign direct investment flows into Malaysia to fall to 26 billion ringgit in 2009 from 51 billion ringgit in 2008.

"It will be a deep and prolonged global recession," he said.

News of the stimulus plan triggered selling of Malaysian government bonds but boosted the ringgit and the stock market.

The five-year benchmark yield rose 20 basis points, or hundredths of a percentage point, to finish the day at 3.8%. The stock market, as measured by the benchmark KLCI Composite index, closed down 0.3% at 855.25, but that was off its low of 848.34 in reaction to the news. The U.S. dollar fell to 3.690 ringgit Tuesday from 3.715 ringgit Friday. Malaysian markets were closed Monday for a holiday.

CIMB Bank's Fixed Income Research Head Lum Choong Kuan said the increase in fiscal deficit underpins concerns that the supply of government bonds may be bigger than earlier estimated.

Write to Elffie Chew at elffie.chew@dowjones.com

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Key facts on the world's water supply

March 11 (Reuters) - Water scarcity is likely to change the way of life of millions of people in the U.S. West, one of the richest and most technologically advanced regions in the world. Other parts of the planet may take cues from the West on how to deal with a global water crisis that is expected to worsen with climate change.

Following are some facts and figures about the world's water:

-- There are 1.4 billion cubic kilometers of water on the planet but almost 97 percent is salt water. Most freshwater is locked up in glaciers or deep underground, leaving only a fraction available for human consumption or use.

-- Most experts believe there is still enough water to go around, but its distribution is very uneven. According to the Pacific Institute for Studies on Development, Environment and Security, North Americans have access to over 6,000 cubic meters per person per year stored in reservoirs. But the poorest African countries have less than 700 and Ethiopia has less than 50 cubic meters per person per year of water storage. Wealthy but water-scarce countries such as Saudi Arabia can afford expensive desalination projects, but poor ones cannot.

-- Agriculture accounts for 66 percent of human water consumption, industry 20 percent, domestic households 10 percent, according to the World Water Council. About four percent evaporates from man-made reservoirs.

-- Providing clean drinking water to the poor is one of the biggest development challenges. The United Nations Millennium Development Goals pledged at the start of this decade "to halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation." The U.N. says that since 1990, 1.6 billion people have gained access to safe water. But nearly a billion people still lack safe drinking water.

(Sources: Reuters, World Bank, International Monetary Fund, United Nations, Pacific Institute for Studies on Development, Environment and Security, World Water Council

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Tuesday, March 10, 2009

GIC:Forced selling seen by investors in next 12-18 mths

SINGAPORE, March 10 (Reuters) - A Government of Singapore Investment Corp (GIC) official said on Tuesday he expects more forced selling of assets by investors in the next 12-18 months as the "de-leveraging" in financial markets continues.

GIC also sees investment-grade corporate bonds as more attractive than equities currently, the fund's director of economics and strategy Yeoh Lam Keong, told the Investment Management Association of Singapore conference.

"This is a very destructive process for assets," Yeoh said, showing a slide that indicated total write downs in the financial sector could reach $3.8 trillion by 2013 and that only about 30 percent of the losses had been booked so far.

GIC, one of the world's largest sovereign funds with an estimated $200 billion-plus in assets, had invested aggressively in troubled international lenders, picking up multi-billion-dollar stakes in Citigroup <C.N> and UBS <UBSN.VX>.

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China reviews Cola-Huiyuan deal under anti-monopoly law

BEIJING, March 10 (Reuters) - China is reviewing Coca-Cola Co's <KO.N> bid to acquire China Huiyuan Juice Group <1886.HK> under the anti-monopoly law, Commerce Minister Chen Demin said on Tuesday.

Chen was speaking after a press conference during the annual parliamentary meeting.

Coca-Cola said in December it had filed an application for anti-trust approval in China. The case is being closely watched by analysts and lawyers since it is the first to test the nascent law.

Coke agreed to pay HK$12.20 a share in cash, nearly three times its HK$4.14 price before the deal was announced last September.

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Mobile Fair - Demand to stay strong despite downturn - U.N.

GENEVA, Feb 16 (Reuters) - Mobile telephones are seen as "a basic necessity" around the world and should enjoy persistent strong demand throughout an economic downturn, a United Nations agency said in a report published on Monday.

"With or without a recession," millions of people in India, China, Nigeria, and other emerging markets will seek out mobile phones, according to the International Telecommunication Union (ITU).

Increasingly cost-conscious households in Europe and North America are also expected to keep up their mobile use, and many will drop their fixed-line telephones as a way to save money, the ITU said in a report released for the Mobile World Congress trade show in Barcelona.

"Once a user gets a mobile phone, it is difficult to give up, and in many countries mobile phones have become a necessity," its Confronting the Crisis report found.

"Many communication technologies including mobile telephony and broadband still offer huge growth potential, with or without a recession," it said. "With its strong growth potential, mobile telephony can help facilitate economic recovery."

There were 4 billion mobile subscriptions worldwide at the end of 2008, after an average of 24 percent annual growth since 2000. Saturation rates are above 100 percent in Singapore and Hong Kong, compared with 30 percent in Nigeria and just over a quarter in India, two of the fastest expanding mobile markets.

The ITU said people in developing countries are increasingly reliant on telephones for voice and information services, such as farmers and fishermen who get text messaging for information about commodity prices and the weather.

The popularity of mobiles in developing markets such as China, Pakistan, Malaysia, Thailand and Bangladesh could create an opportunity for a technology "leapfrog" where Internet services could be provided to consumers without computers.

Companies that have invested heavily in emerging markets include India's Bharti Airtel <BRTI.BO> Norway's Telenor <TEL.OL>, South Africa's MTN <MTNJ.J>, Egypt's Orascom Telecom <ORTE.CA>, Kuwait's Zain and Vodafone's <VOD.L> Vodacom.

Afghanistan, where landline cover is almost non-existent after three decades of war, has drawn a subsidiary of Cable & Wireless <CW.L>, Swedish-Finnish TeliaSonera <TLSN.ST>, and the United Arab Emirates' Etisalat <ETEL.AD>.

COST-CONSCIOUS CALLERS

In richer markets, such as western Europe and North America, the ITU said mobile operators may better placed than fixed-line telephone providers because the investments required to maintain cellular networks can be less onerous.

Many developed-world customers are likely to favour their mobiles to home lines as a result of a downturn, but may be more careful about their spending and delay purchases of handsets, its report said, signalling trouble for telecom equipment and gear makers such as China's Huawei [HWT.UL] and ZTE <0763.HK>, Ericsson <ERICb.ST>, Nokia <NOK1V.HE>.

Pre-paid and flat-rate packages could also become more popular, according to the Geneva-based ITU.

"There is some evidence that consumers are already postponing plans to upgrade their mobile phone and have become more cost-conscious when making calls," it said.

"Operators will find it harder to promote value-added services to wary consumers and the adoption of new services (such as mobile TV) will certainly be impacted."

Tight credit could cause telecom operators to reduce their investments, and encourage industry consolidation, the report said, noting cost-saving outsourcing may also grow.

The ITU encouraged governments to include investments in telecoms in economic stimulus packages now being developed.

"Investing in high-quality, affordable information infrastructure, education and knowledge may be the best way to innovate out of this crisis, especially for developing countries ... Investing in broader access to knowledge becomes even more important during times of crisis, rather than less so."

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Monday, March 9, 2009

Buffett says economy fell off cliff, fears inflation

Economy near worst-case scenario, won't recover fast

* Democrats, Republicans should set aside differences

* Banks should "get back to banking"

(Adds Buffett comments throughout)

By Jonathan Stempel

NEW YORK, March 9 (Reuters) - Warren Buffett said on Monday the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.

Speaking on CNBC television, the 78-year-old billionaire said the country is experiencing a "close to the worst-case" scenario of falling business activity and rising unemployment, causing consumer confidence and spending to tumble.

Buffett called on Democrats and Republican policymakers to set aside partisan differences and unite under the leadership of President Barack Obama to wage an "economic war" that will fix the economy and restore confidence in banking.

He urged policymakers and regulators to communicate their efforts better to the public, though he stopped short of major, specific policy recommendations.

"People are confused and scared," he said. "People can't be worried about banks, and a lot of them are."

Buffett spoke nine days after his insurance and investment company Berkshire Hathaway Inc <BRKa.N> <BRKb.N> said quarterly profit fell 96 percent, largely from losses on derivatives contracts. Berkshire's book value per share fell 9.6 percent in 2008, the worst year since Buffett took over in 1965.

RECOVERY COULD TRIGGER MORE INFLATION

Buffett said Americans, including himself, did not predict the severity of home price declines, which led to problems with securitizations and other debt whose value depended on home prices continuing to rise, or at least not plummet.

"It was like some kids saying the emperor has no clothes, and then after he says that, he says now that the emperor doesn't have any underwear either," Buffett said. "We want to err on the side next time of not allowing big institutions to get as unchecked on leverage as we have allowed them to do."

He said, though, that efforts to stimulate the economy could trigger higher inflation once demand rebounds.

"We are certainly doing things that could lead to a lot of inflation," he said. "In economics there is no free lunch."

The stock of Omaha, Nebraska-based Berkshire has fallen by half since September, with growth in some units such as auto insurer Geico Corp offset by weakness elsewhere, including jewelry retailers that Buffett said have "gotten killed."

Buffett said Berkshire will write less catastrophe insurance this year after investing roughly one-third of its cash in high-yielding securities issued by General Electric Co <GE.N>, Goldman Sachs Group Inc <GS.N> and other companies.

He also said the economy had been mere hours away from collapse last September when credit markets seized up, Lehman Brothers Holdings Inc <LEHMQ.PK> went bankrupt and insurer American International Group Inc <AIG.N> got its first bailout. "The world almost did come to a stop," he said.

While acknowledging that the economy "can't turn around on a dime," Buffett said it will be "running fine" in five years. "This country will work fine even if we screw it up," he said.

In morning trading, Berkshire Class A shares were down $1,705, or 2.3 percent, at $71,490. Their 52-week high is $147,000, set last Sept. 19, Reuters data show.

BANKS SHOULD "GET BACK TO BANKING"

Buffett called on banks to "get back to banking" and said an overwhelmingly number would "earn their way out" of the recession, even if stockholders don't go along for the ride.

Saying that "a bank that's going to go broke should be allowed to go broke," Buffett nevertheless added that the "paralysis of confidence" in the sector is "silly" because of safeguards such as deposit insurance.

He said Wells Fargo & Co <WFC.N> and U.S. Bancorp <USB.N>, two large Berkshire holdings, should appear "better than ever" three years from now, while the ailing Citigroup Inc <C.N>, which Berkshire does not own, would probably keep shrinking.

Consumers, meanwhile, should reduce their dependence on credit cards, he said. "I can't make money borrowing money at 18 or 20 percent," said Buffett, whom Forbes magazine in October said was the second-richest American. "I'd go broke."

He said he still expects Berkshire's derivatives contracts, whose value depends on where four stock indexes trade a decade and more from now, to be profitable.

He said that over 10 years, "you will do considerably better owning a group of equities" than U.S. Treasuries.

Buffett also defended his imperfectly timed October opinion piece for The New York Times, where he said he was moving non-Berkshire holdings in his personal account to stocks.

"I stand by the article," he said. "I just wish I had written it a few months later." (Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace) Keywords: BUFFETT/

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Monday, March 30, 2009

Saturday, March 28, 2009

Friday, March 27, 2009

Thursday, March 26, 2009

By ARIES POON and DAVID WINNING

Bank of China Profit Falls 59%

Fourth-Quarter Drop Shows How Dismal Global Investment Affects the Nation's Big Lenders

Wednesday, March 25, 2009

Volcker: China Chose to Buy Dollars

Thursday, March 19, 2009

Tuesday, March 17, 2009

Wen's Dollar Warning

Preventing the Next Fire While This One Blazes

By DAVID WESSEL

MORE

Wednesday, March 11, 2009

Malaysia Stimulus Tops $16 Billion

State Strains Budget to Shield Economy From Global Downturn

By ELFFIE CHEW

Tuesday, March 10, 2009

Monday, March 9, 2009

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