Monday, 28 February 2011

US stocks gain but oil muddies bullish picture

Bullish comments from Warren Buffett helped US stocks end another good month on a high note on Monday, but uncertainty about oil prices could keep investors from pushing the market much higher.
A sign stocks may stall out was evident in the lackluster volume, in contrast with last week's selloff which occurred on heavy volume. Just 7.3 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, well below last year's daily average of 8.47 billion.
"The market is clearly in a play-it-by-ear mode on what comes next, both in terms of the Middle East, the sustainability of this spike (in oil prices) and what, if sustained, this will do to the global economy," said Peter Boockvar, equity strategist at Miller Tabak + Co in New York.
Brent crude oil prices, which had jumped toward $US120 a barrel last week, eased to $US112. But investors were still jittery that the global economic recovery may be threatened if oil prices stay high.
Buffett, chairman of Berkshire Hathaway, spoke in his widely read annual letter to shareholders of the need for "major acquisitions," a sign stocks may be cheap.
The latest acquisition news came from Ventas, which plans to buy Nationwide Health Properties in a $US5.8 billion stock deal that strengthens Ventas' position as the biggest US owner of senior housing. NHP shares rose 9.7 per cent to $US42.74.
The Dow Jones industrial average was up 95.89 points, or 0.79 per cent, at 12,226.34. The Standard & Poor's 500 Index was up 7.35 points, or 0.56 per cent, at 1327.23. The Nasdaq Composite Index was up 1.22 points, or 0.04 per cent, at 2782.27.
The Nasdaq's gains were the smallest as fell 2.2 per cent to $US173.29 after UBS downgraded the online retailer, citing increased costs.
For the month, the Dow rose 2.8 per cent, the S&P rose 3.2 per cent and the Nasdaq gained 3 per cent.
Comments from Federal Reserve officials hinting they were ready to support the economy if necessary helped ease concern over the scheduled end of the Fed's $600 billion bond-buying program later this year.
New York Fed Bank President William Dudley said policymakers should be wary about withdrawing liquidity too quickly, while St. Louis Fed Bank President James Bullard would not rule out further use of the Fed's unorthodox tool for stimulus.
Data on Monday showed Midwest business activity rose more than forecast in February.
In addition, US incomes posted the largest increase since May 2009 last month. The jump partly reflected a payroll tax cut enacted last year.


Japanese Stocks Advance for Third Day on Oil, U.S. Economy; Shinsei Jumps

Japanese stocks rose for a third day after a decline in oil prices eased concern about energy costs and U.S. data showing higher personal incomes boosted confidence in economic growth.
Honda Motor Co., Japan’s second-biggest carmaker, gained 1.3 percent. TDK Corp., the world’s No. 1 maker of disk drive heads, advanced 1.8 percent. Shinsei Bank Ltd. surged 7.7 percent after the lender partly owned by J. Christopher Flowers had its rating increased at Credit Suisse Group AG. Dentsu Inc., Japan’s largest advertising company, leapt 4.3 percent after Facebook Inc. hired it as a sales and marketing representative.
The Nikkei 225 Stock Average rose 0.8 percent to 10,705.42 as of 9:43 a.m. in Tokyo, advancing for a third day, after declining 2.9 percent last week on concern unrest in Libya would drive up oil prices. The broader Topix index gained 1.1 percent to 961.35, with all 33 of the index’s industry groups advancing. Six stocks climbed for each that fell.
“Although there’s still uncertainty about what’s happening in North Africa and the Middle East, easing crude futures are supportive” for the stock market, said Fumiyuki Nakanishi a strategist at Tokyo-based SMBC Friend Securities Co. “The data continues to show the economy is steadily improving.”
Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. The index advanced 0.6 percent in New York yesterday after reports showed personal income improved more than economists expected and a measure of U.S. business conditions rose to its highest level in more than 22 years.

Higher U.S. Incomes

The Topix increased 5.8 percent through yesterday in 2011, the most among the major Asia-Pacific benchmark indexes. Stocks in the Japanese benchmark are valued at 16 times estimated earnings on average, compared with 13.8 times for the S&P 500 and 11.4 times for the Stoxx Europe 600.
In the U.S., incomes climbed 1 percent in January, exceeding the median forecast of economists surveyed and the most since May 2009, the U.S. Commerce Department said yesterday.
The Institute for Supply Management-Chicago Inc. said yesterday its business barometer rose to 71.2 in February, the highest level since July 1988, from 68.8 in January. Figures greater than 50 signal expansion. The gauge, which was projected to fall, exceeded every estimate of economists surveyed by Bloomberg News.
Crude oil for April delivery declined 0.9 percent to settle at $96.97 a barrel in New York yesterday, the biggest daily drop since Feb. 11, after Saudi Arabia offered to make up for supplies lost because of unrest in Libya.

Yen Relief

Honda gained 1.3 percent to 3,590 yen. TDK advanced 1.8 percent to 5,590 yen. Toshiba Corp., a nuclear power-plant maker, increased 0.9 percent to 540 yen.
The yen fell to as low as 81.98 against the dollar, compared with 81.66 at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency weakened to 113.35 from 112.39. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.
Banks were the biggest support for the Topix. Shinsei Bank surged 7.7 percent to 112 yen, the Nikkei’s largest gain, after the company had its rating increased to “outperform” from “neutral” at Credit Suisse Group. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, climbed 2.4 percent to 464 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-largest, gained 2.4 percent to 3,160 yen.
Dentsu Jumps
Dentsu leapt 4.3 percent to 2,707 yen and was the biggest single contributor to the Nikkei’s gain. Dentsu will provide consulting services for companies that want to use Facebook for advertising and marketing, the Japanese company said in a statement yesterday. Dentsu will have exclusive rights to sell space on Facebook’s premium ad service for one year, according to the statement.
Mitsubishi Heavy Industries Ltd. climbed 2.9 percent to 357 yen after the Nikkei newspaper reported the equipment maker won a 20 billion yen ($244 million) order supplying tankers to Nippon Yusen K.K. It was the first order of its kind for the company in about four years, according to the report.


Saturday, 26 February 2011

Infosys booked for visa and tax fraud

By Praveena Sharma

Infosys Technologies seems to have gotten into the habit of courting controversy. Even as a tax evasion allegation by the Indian income tax department is still staring at its face, the second largest information technology (IT) services exporter has found itself in the midst of another case of visa and tax fraud in the US.
An American employee of Infosys, Jack Palmer has filed a case against the tech vendor accusing it of “systematic visa and tax fraud” to jack up profits.
In his 13-page complaint filed before an Alabama court, Palmer has alleged that Infosys sent lower level and unskilled foreigners to the US to work in full-time positions at its customer sites in direct violation of immigration laws. Palmer, who says he worked as ‘Principal-Enterprise Solutions’ since August 2008, alleged that it was paying these employees for full-time work without withholding federal or state income taxes, and overbilled customers for the labour costs of these employees.
Defending Infosys, TV Mohandas Pai, member of the board and director (human resources), said the company would take appropriate action. “(We cannot react as) the matter is sub judice but we shall rigorously defend ourselves.”
Palmer said after the government restricted the H-1B programme in 2009, he was sent to Bangalore for planning meetings. “During a meeting, the management discussed the ways to 'creatively' get around the H-1B limitations and work the system in order to increase profits and the value of Infosys’ stock,” he said.
“The decision was made by management to start using the B-1 visa programme to get around the H-1B restrictions,” Palmer alleged.


Obama freezes Gaddafi's assets, says he should step down

WASHINGTON: The Obama administration has closed the US Embassy in Libya and frozen all assets held in the US by Libyan leader Muammar Gaddafi, his Government and four of his children, ending days of cautious condemnation by all but calling for the unpredictable leader's immediate ousting.
President Barack Obama said the sanctions were justified by Libya's "continued violation of human rights, brutalisation of its people and outrageous threats" that have drawn condemnation from the world.
"By any measure, Muammar Gaddafi's Government has violated international norms and common decency and must be held accountable," Obama said. He said the sanctions were designed to target Gaddafi's Government and protect the assets of Libya's people from being looted by the regime.
In an executive order detailing the sanctions and signed by Obama, the President said the instability in Libya constituted an "unusual and extraordinary threat" to US national security and foreign policy.
The sharper US tone and pledges of tough action came after American diplomatic personnel were evacuated from Tripoli aboard a chartered ferry and a chartered aircraft, escorting them away from the violence to Malta and Turkey.
As they left, fighting raged on in Tripoli and elsewhere in Libya as Gaddafi vowed to crush the rebellion. With US diplomats and others out of harm's way, the administration moved swiftly.


U.K. Mortgage Lending Picks Up

LONDON—U.K. banks' net mortgage lending rose in January as property-owners looked to fix their costs resulting in an increase in remortgaging activity, data from the British Bankers Association, or BBA, showed Wednesday.
Net mortgage lending rose by £1.6 billion in January, higher than December's gain of £0.9 billion. The number of remortgage approvals increased to 26,109 in January from 24,946 in December. However, mortgage approvals, a good forward-looking indicator of activity and prices, increased only slightly to 28,932 in January from 28,907 the previous month.
In a further blow for the housing market, the prospect that the Bank of England will soon raise interest rates strengthened Wednesday after minutes of the bank's February policy meeting revealed that three of the board's nine members voted for a rise.
"Any early interest rate hike would be bad news for the housing market and likely to weigh down on prices—not just the rate rise itself but also the impact on potential house buyers' psychology resulting from the fact that they would be facing rising interest rates with the prospect of more to come," Howard Archer, chief European and U.K. economist at IHS Global Insight, said
Paul Diggle, property economist at Capital Economics, said the increased likelihood of a near-term rate rise meant remortgaging could receive a temporary boost, as existing borrowers rush to take out fixed rates.
Wednesday's data also showed that lending to nonfinancial companies fell by £300 million in January compared to a fall of £3.4 billion in December.
The BBA—a trade association for the U.K. banking and financial services sector—said in both company finance and unsecured borrowing the emphasis is on repayment rather than new borrowing.
"This is a reflection of current very low consumer confidence and is the consequence of an uncertain and somewhat worrying longer-term outlook for the economy and jobs as the major fiscal squeeze increasingly kicks in over the coming months. Meanwhile, there remains limited availability of unsecured credit from banks," Mr. Archer said.


Jefferies Group Inc. Boosts Lending In Diversification Pitch

By Liz Moyer 
NEW YORK (Dow Jones)--Jefferies Group Inc. (JEF) is doubling its resources in middle market lending and adding commercial real estate lending as part of an effort to diversify its traditional investment banking and trading businesses.
On Friday, the firm and Massachusetts Mutual Life Insurance Co. announced they would inject another $500 million into a five-year-old joint venture, Jefferies Finance, that provides loans to middle-market and larger corporations and financial sponsors. That follows an announcement earlier this week that Jefferies had teamed up with the Government of Singapore Investment Corp. (GIC.YY) and Mark Finerman's LoanCore LLC in a $600 million joint venture to originate commercial real estate loans.
Middle market lending is seen as a growth area for banks now that other previously hot businesses, especially in trading, are being constrained by new regulation. And there is plenty of competition in the field, from large U.S. commercial banks like J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC) to specialized commercial lenders like CIT Group Inc. (CIT).
Jefferies has been diversifying in recent years, adding to its advisory and cash equities capabilities to become more of a full-service investment bank. Brian Friedman, the chairman of the firm's executive committee, said in a telephone interview Friday that consolidation on Wall Street and among regional banks had created opportunities in middle market lending.
New England alone was once home to regional lending giants Fleet Financial Group and Bank of Boston, but both companies got swallowed up in acquisitions and are now part of Bank of America. Fewer choices among large commercial banks created a vacuum for newer lenders.
In addition, corporate and acquisition finance completes Jefferies' product offerings, Friedman said. "The capacity to provide direct financing to companies through Jefferies Finance is fundamental to our business and part of our integrated offering."
Among Jefferies Finance's recent deals, it was a joint lead arranger on a $408 million loan to finance Film Yard Holdings' acquisition of the Miramax film library from Walt Disney Co. (DIS); a $230 million loan to finance Leonard Green & Partners' buyout of AspenDental; and a $200 million credit facility for Dave and Busters.
Among arrangers of syndicated loans in large middle market deals involving financial sponsors, it ranked sixth last year, according to, a unit of Thomson Reuters.
Commercial lending was one of the only industry loan categories to grow in the fourth quarter, according to data from the Federal Deposit Insurance Corp. Total assets of insured institutions fell by $51.8 billion in the quarter, including declines in trading assets, real estate construction and development loans, and non-credit card consumer loans. In contrast, commercial and industrial loans in the industry rose by $11.8 billion, the second consecutive quarterly increase.
Jefferies Finance has loaned $20 billion over five years, in increments ranging from $100 million to $1.5 billion. The joint venture began in 2004. Mass Mutual affiliate Babson Capital Management LLC manages the portfolio of loans underwritten by Jefferies.
The new commitment includes $250 million from each partner, raising the total commitment to $1 billion. Each firm will fund equally an additional $1 billion revolving credit line to support large loan underwritings by the finance unit.


BSP fortifies consumer protection policies


MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) continues to review existing regulations on the credit card operations of banks, quasi banks and their subsidiaries to further strengthen policies for the protection of the financial consumer.

"The BSP is deeply involved in various projects and activities to support the economic and social development objectives of the government through its advocacies, one of which is on the promotion of consumer protection," noted a memo prepared by the Supervision and Examination Sector.

The latest of the SES amendments to credit card regulations was the prohibition on the issuance of pre-approved credit cards.

The rationale why the BSP disapproved its issuance was that it was not consistent with the general guidelines on the grant of loans and other credit accommodations under the BSP's Manual of Regulations for Banks (MORB).

Based on the MORB, before granting loans and other credit accommodations, a bank must ascertain that the borrower is financially capable of fulfuling his/her commitments to the bank.

The requirements for the granting of loans include latest income tax return or financial statements submitted to the Bureau of Internal Revenue.

The SES however noted that since credit card issuing banks and firms determine the paying capacity of a credit card applicant, the regulations may have created the impression that it is alright to issue pre-approved credit cards as long as the credit card-issuing institution has in place the system to manage risk exposures.

"Because of confusing provisions of the regulations and the stiff competition in the credit card business, a number of credit card issuing institutions have resorted to issuing pre-approved and sometimes even pre-activated pre-approved credit cards at the risk both of sacrificing the quality of their loan portfolio and of exposing the financial consumers to financial fraud which may be brought about by the unauthorized use of pre-approved credit cards," said the memo.

Last November the BSP amended its existing credit card regulations and one of the key features was the prohibition of the issuing pre-approved credit cards.

Also amended was credit card collection practices which was one of the main complaints of the financial consumer.

An important feature of the revisions was that credit card issuers are now required to disclose not only the name of the collection agency, but cardholders will be given the name of the agent assigned to his/her account once the bank or the card-issuing firm has endorsed an account to a third-party collector.

Based on newly-issued Circular No. 702 Section 4, banks and quasi-banks and their subsidiaries/affiliate credit card companies would have to inform cardholders in writing of the endorsement of the collection of their account to a collection agency at least seven days prior to the actual endorsement.


3 Banks Warn of Big Penalties in Mortgage Inquiries


Several big banks warned investors on Friday that they could face sizable financial penalties as a result of state and federal investigations into abusive mortgage practices.
The disclosures by Bank of America, Wells Fargo and Citigroup came after a furor late last year over how foreclosures were being conducted.
Until now, the banks have emphasized that the foreclosure controversy was mostly a threat to their reputation, rather than a financial worry. But the disclosures, made in the banks’ annual financial filings with the Securities and Exchange Commission, suggest that a settlement with the government may affect both.
State attorneys general and federal regulators began examining the servicers’ practices last fall after reports that some foreclosures were being pursued despite lost or missing documents. In other cases, employees had signed off on thousands of pages of paperwork a month, after only a cursory look.
In some cases, banks mistakenly pursued homeowners who should not have been threatened with foreclosure, while other mortgage holders reported it to be nearly impossible to reach anyone at the banks to discuss their situation.
The review also includes more basic practices, including scrutiny of whether the original loans were made properly and whether modifications of existing home loans have been done fairly.
“The current environment of heightened regulatory scrutiny has the potential to subject the corporation to inquiries or investigations that could significantly adversely affect its reputation,” Bank of America said in the filing.
The state and federal inquiries “could result in material fines, penalties, equitable remedies (including requiring default servicing or other process changes), or other enforcement actions, and result in significant legal costs,” Bank of America said.
Wells Fargo said in its filing that it was “likely that one or more of the government agencies will initiate some type of enforcement action,” including possible “civil money penalties.”
Citigroup acknowledged that federal and state regulators were investigating its foreclosure processes, which could result in increased expenses, fines and other legal remedies like a program to reduce the principal amount owed on some loans. While Citigroup has determined that “the integrity of its current foreclosure process is sound and there are no systemic issues,” it warned that it could be adversely affected by industrywide regulatory or judicial action.
Since last fall, a task force of federal bank regulators has been reviewing the foreclosure practices and internal controls of the 14 largest mortgage servicers. The examination has already identified a range of sloppy practices at all the servicers, including inadequate staffing, lax oversight of outside law firms and other vendors hired to assist with the foreclosure process, and errors with documentation.
In testimony before a Senate banking committee last week, John Walsh, the acting comptroller of the currency, which oversees national banks, said his agency and other federal regulators had ordered the servicers to take corrective actions.
The banks have not yet received any formal proposals from either the attorneys general or the regulators. But a proposed settlement is expected to be ironed out in the coming weeks and then presented to the banks.
The banks are eager to put the foreclosure controversy behind them. Earlier this month, Bank of America’s chief executive, Brian T. Moynihan, said the bank was creating a special unit to hold billions of dollars in defaulted mortgages and other toxic debt.
Despite reports in recent days that a global settlement of the mortgage accusations was being floated by the Obama administration, for $20 billion or more, some bank officials and regulators expressed skepticism Friday that the eventual hit to the banks will be that high.
Indeed, many regulators in Washington are wary of too punitive a settlement for fear of hobbling their recovery just as they are turning around. Memories of the financial crisis in the fall of 2008 and the subsequent federal bailout are still vivid.
Still, even if any settlement with regulators and the attorneys general does not run into the tens of billions, the financial consequences of the housing boom and subsequent bust will haunt the banks for years. Private investors are seeking to force financial institutions to buy back tens of billions of dollars’ worth of mortgages in default, arguing the original loans were made improperly.
Over the last year, the biggest banks have set aside several billion dollars each to cover potential claims stemming both from the foreclosure mess and lawsuits by private investors holding soured mortgages.
On Friday, Elijah E. Cummings, a Maryland Democrat who is a member of the House Committee on Oversight and Government Reform, requested information from 11 mortgage servicers and foreclosure specialists as part of a separate Congressional investigation. He also requested special reviews of servicer abuse claims, as well as the actions of law firms specializing in foreclosures. A hearing is scheduled for March 8 in Baltimore.


Thursday, 24 February 2011

UPDATE 2-Lloyds swings back to profit despite Irish hit

LONDON, Feb 25 (Reuters) - Part-nationalised British bank Lloyds (LLOY.L: Quote) swung back into profit last year after a recovery in its core UK retail banking operations absorbed a 4 billion-pound ($6.5 billion) hit on bad debts in Ireland.
Lloyds, Europe's fifth biggest bank by market value, made a pretax profit of 2.2 billion pounds ($3.6 billion), 300 million pounds ahead of the average market forecast, having lost 6.3 billion pounds in 2009.
Losses on bad loans fell 45 percent to 13.2 billion pounds thanks to a "slowly improving economic environment", but the bank said that improvement had been capped by its problems in Ireland, which worsened in the last quarter of the year.
"While we were disappointed by the increases in the international portfolios, these reflect specific economic challenges facing Ireland, and to some degree Australia, which we are managing closely," the company said.
In Ireland, where voters are today expected to punish the ruling Fianna Fail party for its handling of the financial crisis, bad loans rocketed to 4.3 billion pounds from 2.9 billion in 2009.
Lloyds is 41 percent owned by the UK government after being bailed out during the credit crisis when it was saddled with billions of pounds of losses from its takeover of troubled rival HBOS in 2008, a deal brokered by the Labour government of the time. Its shares closed up 0.4 percent at 65.78 pence on Thursday. ($1=.6205 Pounds) (Reporting by Sudip Kar-Gupta and Steve Slater; Editing by Paul Hoskins, Greg Mahlich)


Libya concerns see US stocks slide

US stocks fell for a third day as concerns continued over how violent clashes in Libya would affect the global oil market.
Major indexes pared steeper losses on Thursday afternoon after oil prices fell for the first time in nine days.
Oil fell to 97.28 dollars a barrel after the International Energy Agency said fighting between forces loyal to Muammar Gaddafi and anti-government protesters in Libya were not affecting oil inventories as much as analysts had feared. Libya is the world's 15th largest exporter of crude, accounting for 2% of global daily output. Oil had traded as high as 103.41 dollars earlier in the day.
Traders are worried that fighting could threaten Libya's oil production and spread to other countries in the region, such as oil-rich Saudi Arabia. Higher oil prices can also slow the US economy by increasing transportation costs.
Reports of ample oil inventories "calmed some of the short-term fears in the market," said Bruce McCain, chief investment strategist at Key Private Bank. "But the fact that there is very little real information coming out the country is worrying."
The Dow Jones industrial average fell 37.28 points, or 0.3%, to 12,068.50. It had been down as many as 122 points earlier in the day.
The Standard&Poor's 500 index fell 1.30, or 0.1%, to 1,306.10. The Nasdaq composite gained 14.91 points, or 0.5%, to 2,737.90.
The mixed stock performance came the same day the Labour Department reported that fewer people applied for unemployment benefits last week, a sign that the job market is recovering.
The four-week average for applications, a figure closely watched by financial analysts, fell to its lowest level in more than two and a half years.
The housing market, however, continued to lag. The Commerce Department said sales of new homes fell significantly in January.


Asian Stocks Rise for First Time This Week on Oil; Hynix Climbs

By Sarah Jones and Akiko Ikeda

Feb. 25 (Bloomberg) -- Asian stocks rose after a four-day selloff as crude oil fell below $100 a barrel amid easing concern about supply disruptions in the Middle East, and as chipmakers climbed.
Cathay Pacific Airways Ltd. surged 3.8 percent in Hong Kong as the U.S., Saudi Arabia and the International Energy Agency said they can compensate for any disruption to Libyan oil shipments. Hynix Semiconductor Inc. gained 4.1 percent in Seoul after analysts said prices for memory chips may climb next month. Toyota Motor Corp. rallied 2.2 percent after Credit Suisse Group AG recommended the world’s largest carmaker.
The MSCI Asia Pacific Index rose 0.9 percent to 136.51 as of 3:43 p.m. in Tokyo, with about twice as many stocks advancing as declining. The gauge has dropped 2.4 percent this week as crude climbed above $100 a barrel for the first time in two years amid escalating violence in Libya, which has the largest oil reserves in Africa.
“Shares are correcting from the recent declines, helped by an easing in the oil price,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion.
Japan’s Nikkei 225 Stock Average and South Korea’s Kospi Index climbed 0.7 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent. China’s Shanghai Composite Index was little changed. Hong Kong’s Hang Seng Index rallied 1.6 percent.
“The reassurance from Saudi Arabia to lift output and offset Libyan production seems to have helped,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney.
U.S. Futures Rise
Futures on the Standard & Poor’s 500 Index gained 0.4 percent today. Most stocks in the index climbed yesterday, boosted by the drop in oil and a bigger-than-estimated decline in U.S. jobless claims last week.
Cathay Pacific, Hong Kong’s biggest airline, surged 3.8 percent to HK$17.72. Korean Air Lines Co., South Korea’s largest carrier, advanced 4.8 percent to 64,000 won, ending the week with a 9.2 percent plunge. Qantas Airways Ltd., Australia’s largest carrier, rose 2.2 percent to A$2.38 in Sydney today.
New York oil futures retreated from $103.41 yesterday, the highest in 29 months, after President Barack Obama said the U.S. will be able to “ride out” a cut resulting from turmoil in Libya. Crude for April delivery lost as much as 0.7 percent $96.61 a barrel. It traded at $97.77 a barrel at 11:37 a.m. Sydney time.
Libyan leader Muammar Qaddafi’s grip on the nation weakened yesterday as a close adviser abandoned him, opponents consolidated their control of the country’s oil-rich east, and Switzerland froze some of his assets.
‘World Could Cope’
“The world could adequately cope without Libyan oil if supply was disrupted for a period of time,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The greater concern is the contagion of civil unrest throughout the Middle East and North Africa.”
Hyundai Engineering & Construction Co., which generates about 38 percent of sales from the Middle East, climbed 6.5 percent to 75,500 won in Seoul, while rival Samsung Engineering Co. advanced 5 percent to 187,500 won. Samsung has the biggest exposure to the Middle East and North Africa region at 79 percent of its third-quarter backlog, according to UBS AG.
Hynix, Elpida Gain
Information-technology companies rose the most among the MSCI Asia Pacific Index’s 10 industry groups. Hynix, the world’s second-largest maker of computer-memory chips, jumped 4.1 percent to 28,000 won. LIG Investment & Securities Co. said contract prices for chips may rise in March and analysts will increase their first-quarter earnings estimates for the company.
Elpida Memory Inc., the world’s No. 3 maker of computer- memory chips, rallied 6.4 percent to 1,216 yen in Tokyo. The company has scrapped plans to merge with Taiwanese memory makers because of opposition from the target companies, President and Chief Executive Officer Yukio Sakamoto said today.
HTC Corp., the world’s largest maker of handsets using Google Inc. and Microsoft Corp. operating systems, surged by the 6.8 percent daily limit in Taipei to a record NT$1,065 on speculation the sale of new handsets from next month will boost revenue, according to Chen Wei-hang, an analyst at President Capital Management Corp.
Toyota increased 2.2 percent to 3,755 yen in Tokyo after Credit Suisse boosted its investment rating on the carmaker to “outperform” from “neutral.” The shares climbed even after the company recalled 2.17 million Toyota and Lexus vehicles in the U.S. for carpet and floor-mat flaws that could jam gas pedals.
Profit Boosts AIA
AIA Group Ltd. jumped 6.6 percent to HK$22.50 in Hong Kong after the third-largest Asian insurer by market value reported better-than-estimated earnings. The company had the biggest percentage gain in the MSCI Asia Pacific Index’s finance group.
Jiangxi Copper Co. advanced 2.8 percent to HK$23.90 in Hong Kong as China’s largest producer of the metal said its annual tax rate will drop to 15 percent from 25 percent for three years after the company was recognized as a “high-tech enterprise” by the provincial government.
The MSCI Asia Pacific Index declined 1.7 percent this year to yesterday, compared with gains of 3.9 percent by the S&P 500 and 1.7 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.8 times estimated earnings on average, compared with 13.6 times for the S&P 500 and 11.1 times for the Stoxx 600.


Don’t count distressed debt out yet


Credit spreads have tightened, the economy is recovering and companies are better able to borrow. All of that spells bad news for distressed-debt investors, and a recent survey found they are moving in droves down the capital structure to get better returns.
All of that is true, says Newton Glassman, managing partner of Catalyst Capital Group in Toronto, but he wants to point out that most of these investors are passive by nature. If paper is quoted at 70 cents and they believe it’s worth 75 cent, they buy it on the market just like a stock. Contrarily, there is still room for active investors, he said.
During the crisis, the passive types "followed the herd,” he said, and now that the herd is moving in the opposite direction, they are following suit. Plus, many of these investors realized they don’t have the skills necessary to generate returns when the market is moving sideways.
Mr. Glassman, however, is a so-called active investor and 85 per cent of his funds’ returns are “manufactured,” meaning that Catalyst has gone in and taken a hands-on role. Although he is tooting his own horn a little, he has the experience to back it up, including restructurings for Canwest and Quebecor World.
Although he is adamant that there is still money to be made in active distressed investing, he cautions that it’s not for everyone. “You have to have all the private equity skills; you have to actually be willing to get involved in dirty companies that are in trouble; and you have to understand bankruptcy and bankruptcy process,” he said.
Mr. Glassman acknowledges this style of investing isn’t in heavy demand right now, but he says it will be soon because, like any market, high-yield debt moves in cycles.



Brazilians Keep More Money in Swiss Banks Than Most Everyone Else in the World

Brazilians keeps more money (the kind of money they can’t keep in Brazil) in Switzerland than the Chinese, Indian or Saudis do.  Official figures put the amount at $6 billion while unofficial estimates go as high $60 billion. 
Despite heavy federal police operations aimed to avoiding the flight of capital to Swiss banks, Brazilians have millions divided between Geneva, Zurich and other financial havens of the European nation.
That sum only represents the funds that have been declared officially; certain Swiss bank employees, estimate the real sum could be ten times higher, since a considerable amount of Brazilian money was transferred from places like the Cayman islands and the Caribbean, and so not accounted as of Brazilian origin in Swiss bank archives.
Most of the Brazilian money in Swiss banks, is classified as “Fiduciary Operations,” a label that means the bank is not obliged to present it in their balances. These label also allows several politicians and important Brazilian figures to hide their personal fortunes, all they have to do is present a document to the bank, guaranteeing the funds weren’t made through political activities.

URL: //

Wednesday, 23 February 2011

Moscow Strives to Be Finance Center

By Howard Amos
LONDON — Moscow's aspiration to become a center for international finance will be good for the country, industry leaders agreed last week at the close of a conference in London.
"We are looking forward to the good times," said Danny Corrigan, a former director of ING Bank in Moscow.
Opinion is divided over how far Moscow has come since President Dmitry Medvedev first proposed the idea in 2008, on the eve of the financial crisis.
The London-based Z/Yen think tank, which produces biannual rankings of global financial centers based on their competitiveness, ranked Moscow 68 out of 75 in September. This was no improvement over its position in March.
The rankings are based on three different criteria: connectivity — how well a center is known around the world; diversity — the breadth and richness of the business environment; and specialty — the depth of industry sectors.
Moscow is behind such cities as Warsaw, Milan, Stockholm and Glasgow, and St. Petersburg is down another three notches from Moscow, occupying 71st place.
Z/Yen's associate director, Mark Yeandle, says the situation is more positive than the figures suggest. He said that, in the case of Moscow, "perceptions have not caught up with reality."
Participants in the conference highlighted several recent steps made toward fulfilling the aspiration to become a global financial seat. Last year saw the first foreign issue of ruble-dominated bonds, by Belarus, and the beginning of trading of the yuan against the ruble on MICEX.
On Feb. 2, it was announced that an agreement had been reached to merge the MICEX and the dollar-dominated RTS exchanges, the country's leading bourses.
High-level support for the project has been consistently strong. Veteran politician Alexander Voloshin, who was a  member of Boris Yeltsin's inner circle and is a former chairman of mining company Norilsk Nickel, was appointed in May by President Dmitry Medvedev to head the drive to create an international financial center.
Voloshin promptly began to assemble a team of experts to help carry out the mission, and Medvedev issued an official decree at the end of last year formalizing the consultative group.
The ambition formed a central part of Medvedev's message to the global business community when he attended the Davos Economic Forum last month. "The International Finance Center [in Moscow] must become not only the center of Russia's finance system, but also an accelerator of finance markets across the post-Soviet space," Medvedev said. "This project is Russia's great breakthrough into the world's economy."
The appointment of Moscow Mayor Sergei Sobyanin, with more direct and cordial links to the federal government than his predecessor, Yury Luzhkov, has also facilitated increased emphasis on the project. Sobyanin has been vociferous in his support.
Vneshekonombank first deputy chairman Nikolai Kosov said in London, however, that concrete steps have to accompany the political rhetoric. "The main thing is implementation and real practices," he said.
In addition to issues about progress on specific aspects of the program, some observers have more fundamental criticisms of the project as a whole.
Andrei Nikichenko, president of NGO pension fund Stalfond, said that if Moscow wants to be successful in its bid, it must create a financial niche in which it excels. "So far I do not see a correct answer," he said.
Hans-Joerg Rudloff, a board member of Rosneft and chairman of Barclays Capital, the investment banking arm of Barclays, said last week at the conference that Russian companies must list their shares and trade in rubles in Moscow.
Investors will come to Moscow if they want to invest in Russian companies, Rudloff said. "Because of its ambitions to be one of the great powers of the world, [Russia] cannot rely on substitute markets," he said.

The head of Citi Russia, Zdenek Turek, is on the committee set up by the Kremlin last year to address administrative barriers to making Moscow a financial center.
Turek told The Moscow Times that an overhaul of the country's financial infrastructure would be necessary to turn international attention to the ruble and to Moscow. At the moment, he said, "it's much less efficient to operate your investments in Russia than in any other market with established stock exchange infrastructure."
Some have also raised the issues of political stability, corruption and judicial independence as factors on which Moscow's plans will stand or fall.
Turek said that, while visa changes in 2010 have helped, "full transparency and the full rule of law" are necessary to attract more investment.
Political stability is also fundamental.
Although "Moscow has everything in place to become an international financial center," Rudloff said, the next 12 to 15 months will be decisive.
Already the 2012 presidential election, he said, "is starting to cast a shadow over the investment climate."


Ipic mandates six banks for possible bond issue in Europe

Abu Dhabi: Abu Dhabi's International Petroleum Investment Co (Ipic), confirmed yesterday that it has mandated banks for a European roadshow ahead of a potential euro or sterling denominated bond issue.
The series of European meetings will start on Monday, Ipic said yesterday.
Goldman Sachs, Banco Santander, BNP Paribas, Credit Agricole CIB, Deutsche Bank and UniCredit are arranging the meetings for Ipic, a key investor for Abu Dhabi's government in global oil and gas assets. Ipic holds a stake in Italy's UniCredit.
Bankers said earlier yesterday the meetings will target fixed income investors in London, Edinburgh, Geneva, Zurich, Frankfurt, Munich, and Amsterdam.
Ipic last week made a €4.04 billion bid to take over Spanish oil company Cepsa, in which it already owns a major stake.
The firm sold its first bond in November last year, raising $2.5 billion through a $1 billion five-year issue and a $1.5 billion ten-year issue.
It is rated Aa3 by Moody's and AA by Standard & Poor's and Fitch. Abu Dhabi's government has repeatedly said it unconditionally backs the firm.
In the October 2010 prospectus documents for that bond sale, balance sheet data showed Ipic had $20.3 billion of total debt-including the borrowings of companies it owns such as Borealis, Nova Chemicals and Aabar Investments-compared with $14.6 billion in equity, as of June-end last year.
Ipic had total liabilities of $33.5 billion, compared with assets worth $48 billion.


Bank Capital Buffers May Cut Growth, Volatility, BIS Says

By Jim Brunsden

Plans to require banks to hold extra capital during credit booms could limit growth, reducing the volatility of the global economy by up to 20 percent, according to a report published by the Bank for International Settlements.
Such buffers “could have a more sizable dampening effect on output volatility” than rules regulators set to govern the capital banks must hold at all times. Economic fluctuations could be reduced by up to 20 percent compared with a “baseline” scenario, the study published today said.
“This is a vital first step to allow regulators and the banking industry to understand the long term impact of Basel III,” said Irina Sinclair, a senior associate at law firm Allen & Overy.
A repeat of the excessive lending that fueled the financial crisis could be prevented using so-called counter-cyclical capital buffers, according to regulators. The buffers would be imposed on lenders when authorities determine a credit bubble is forming, and could then be drawn down to help lenders absorb losses after a market crash. Details of that plan were published by the Basel Committee on Banking Supervision in December.
“What’s important now is for the industry to test the assumptions and models which the study is based on if it is going to have the credibility everyone wants,” Sinclair said.
The Basel committee brings together authorities from 27 countries to coordinate capital and liquidity rules for banks and is part of the BIS structure.
Increasing the capital banks must hold at all times to protect themselves against insolvency will lead to a “long- term” reduction in economic growth, the BIS said. Each one percentage point increase in capital causes an average 0.09 percent decline in output, compared with the baseline, it said. The Basel committee agreed in September to more than double the core capital banks must retain.
The committee said in December that the capital rules would cut economic growth by as much as 0.22 percent over the eight- year period in which they will be implemented.


UPDATE 3-U.S. banks told they need to start lending again

* Lending contracts for 10th quarter - FDIC
* Q4 profit $21.7 bln vs year-ago loss
* FDIC's Bair: "We need to see more lending"
* Lending down 0.2 pct to $7.4 trln, led by construction
* Number of problem banks up 24 to 884 (Adds link to Breakingviews column)
By Dave Clarke
WASHINGTON, Feb 23 (Reuters) - In the black for 2010, its first profitable year since 2007, the U.S. banking industry now needs to start lending again.
At least that's what Sheila Bair, the chairman of the Federal Deposit Insurance Corp, advocated as her agency delivered the industry's fourth-quarter report card.
"If you want to have long-term sustainable earnings you can only reduce loan-loss provisions for so long, we need to see more lending," she said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic of loan balances: Reuters Breakingviews: [ID:nN23191130] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
On the face of it, the industry looks in good shape. The FDIC reported that banks had combined earnings of $21.7 billion, marking their fourth profitable quarter in a row.
But statistics showed that lending contracted for the 10th straight quarter to $7.38 trillion, down 0.2 percent or $13.6 billion.
Bair's take: The industry's recovery will not take hold until banks start making money off new loans, rather than just release money set aside to cover shaky prior loans.
Indeed, a big help in the fourth quarter was that banks reserved $31.3 billion less for bad loans compared with the year-ago period.
Bankers argue that lending is all about demand. Until the economy fully recovers, banks can't turn on the spigot, they say.
"Business loan demand is still anemic," said Rob Strand, senior economist with the American Bankers Association.
Bair expressed sympathy for that argument on Wednesday, but said the banks should still be doing more.
"The old-fashioned lending that they used to do, we need to see more of that," she said.
Loan balances declined by $13.6 billion in the fourth quarter compared a $6.6 billion drop in the previous quarter.
Construction and development dropped 9 percent or $32.5 billion, the biggest drag. Lending is increasing slightly elsewhere, with lending for residential mortgages ticking up by $17 billion or just less than 1 percent.
"The banks that are willing to step up and take on a little more risk right now may fair better in the long term," said Chip Hendon, a senior portfolio manager at Huntington Asset Management in Cincinnati. "Things are always cyclical -- people always get too greedy on one side and too fearful on the other. The risks to the market were very real, but overdone in the years past."
Credit card loans increased by $18.1 billion, or 2.6 percent, helped by holiday shopping albeit at a slower pace than in 2009 when card lending jumped by 7.4 percent.
Bair said the outlook for the industry overall is improving even for smaller banks who have been burdened by soured commercial real estate loans.
In another good sign, the amount of bad loans on banks' books, those 90 days or more past due, declined for the third consecutive quarter.
Nevertheless, the number of banks on the FDIC's problem list rose slightly to 884 in the fourth quarter, an increase of 24 from the previous quarter. A year ago, the FDIC added 150 institutions to the list.
So far in 2011, 22 banks with $9.3 billion in assets have failed. For all of 2010, 157 banks with total assets of $92 billion failed after 140 banks failed in 2009 with total assets of $169.7 billion.
Only a small percentage of the banks on the problem list end up failing. The FDIC does not disclose the names of these institutions that are flagged for low capital levels, poorly performing assets or other troubles.

(Reporting by Dave Clarke in Washington and Clare Baldwin in New York; Editing by Jack Reerink and Tim Dobbyn)


U.S. consumer group says debit-fee caps need tweak

NEW YORK/WASHINGTON | Wed Feb 23, 2011 6:07pm EST
NEW YORK/WASHINGTON (Reuters) - The Consumer Federation of America became an unlikely ally of the U.S. banking industry this week, though only up to a point, as the prominent consumer advocacy umbrella group urged regulators to reconsider their sharp caps on debit-card processing fees.
Banks and retailers this week waged a furious war of words over Federal Reserve proposals on so-called "interchange" fees, which merchants pay banks and credit-card networks every time a customer buys something with a debit card.
The Fed in December proposed capping those fees at roughly 12 cents per transaction -- a 75 percent drop -- and solicited comments on its proposals through Tuesday.
The Consumer Federation "strongly endorses the intent of the statute" regulating debit interchange fees, Legislative Director Travis Plunkett said in a letter filed on Tuesday. He added that the current system of fees can be particularly harmful to poor consumers.
But the group also raised concerns about the potential impact of the Fed's proposals on consumers. Some banks are trying to offset their expected lost revenues by adding new fees to checking accounts, and bankers have warned that the poorest consumers may no longer be able to afford traditional bank accounts as a result.
"We recommend that the Federal Reserve consider broadening its pricing standard to include compensation for additional, legitimate incremental expenses," Plunkett said in the letter, adding that such additional expenses could include costs for fraud prevention and for fixing billing errors.
"If such compensation does not occur, these institutions could increase debit-card and other related banking charges on their least desirable and most financially vulnerable consumers: low-to moderate-income (LMI) accountholders," he wrote.
The Consumer Federation also urged the Fed to "pay close attention" to how the proposals would affect small banks and credit unions. Last week, Fed Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair said the Fed's December proposal could inadvertently hurt small banks and consumers.
The finalized proposals will be unveiled in April, and banks will have to implement them by July.
(Reporting by Maria Aspan and Dave Clarke; Editing by Gary Hill)