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China orders "Big Four" auditors to restructure

CHINA: The world's top four accounting firms will have to bring in Chinese citizens to run their operations in China and end the dominance of foreign partners under new rules announced by the Finance Ministry on Thursday.

The Big Four auditors - Deloitte Touche Tohmatsu, Pricewaterhousecoopers, Ernst & Young and KPMG - must start to convert their practices this August 2012 and comply with all the new rules by the end of 2017.

The rules require them to "localise" their operations so that they are led by Chinese citizens and dominated by accountants holding China's accountancy qualifications.

The changes come at a difficult time for the Big Four, grappling with the fall-out from a string of accounting scandals at Chinese companies listed in the U.S. that has left investors questioning the quality of auditing in China.

On Wednesday, U.S. securities regulators charged Deloitte's China practice for refusing to provide audit work papers related to a U.S-listed Chinese company under investigation for accounting fraud.

The new rules will force the proportion of foreign partners at the Big Four to be a maximum of 40 percent when the structure is adopted in August this year, and fall to under 20 percent by 2017.

This is likely to come as a relief to the firms, as there had been concerns that China could force them to convert more quickly to Chinese-dominated practices.

"This is an excellent compromise China is providing for a transition for the transfer of power from the expatriate partners to the local partners," said Paul Gillis, Professor of Accounting at Peking University and author of the China Accounting Blog.

"If the firms handle this responsibly, it allows them a period of time to further develop their local partners for senior management responsibilities," he added.

Tougher though, will be the requirement that each of the Big Four's senior partner be a Chinese citizen. All are currently led by foreigners.

None of the accounting firms immediately responded to requests for comment.

The foreign joint venture arrangements currently used by the Big Four were signed 20 years ago and allowed foreign-qualified accountants to dominate their China practices.

Since then, the firms have come to dominate the country's accounting industry, having won much of the lucrative work to audit the books of state-owned enterprises when they first listed.

In 2010, their audit practices, excluding their consultancy businesses, had combined revenue of more than 9.5 billion yuan ($1.5 billion), according to the Chinese Institute of CPAs (CICPA).

However, their market share has slipped in recent years to about 70 percent of the revenue among the top-10 auditors, down from 85 percent in 2006.

Including consulting, the four firms say they each employ around 10,000 people in mainland China, Hong Kong and Taiwan.

Singapore's accounting industry went through similar changes in the 1980s, as did Hong Kong's in the late 1990s. In those cases the local partners used their enhanced voting power to force out many foreign partners.

"I'm hoping China will have a smoother path than was seen before but human nature being what it is, I think that's unlikely," said Gillis.

- Reuters, 10 May 2012

Views from McMillan Woods
This change of the accounting landscape would certainly bring lots of watchful thoughts to the international network. Let's wait and see the effect of such change. For further information, please email to info@mcmillanwoods.com

Asia's growth picking up

Q1 was the worst quarter, conditions to get better

SINGAPORE: Asia's economic growth probably troughed in the first quarter but a bounce-back may be muted, a Reuters poll showed.

Although the fear factor has faded over Europe's debt crisis and a slowing US economy, both will still be a drag on growth rates in the region.

Respondents in a quarterly survey of over 250 economists refrained from slashing growth forecasts for the first time in a year, a sign that the outlook for Asia is certainly upbeat even though it may be too early to celebrate.

"Confidence is slowly crawling back in", said Frederic Neumann, cohead Asian economics research at HSBC.

"We have seen in China much more aggressive action been taken to support growth, China clearly remains the regional engine, plus the financial risks we saw emanating from Europe last year have also started to dissipate."

While powerhouses China and India will not have the double-digit growth seen before the global financial crisis, both economies will rebound in 2013, supported by policy easing, robust domestic demand, reviving exports and a stabilisation in the long drawn European debt crisis.

"The first quarter has seen the bottom in growth, things are stabilising, and will possibly re-accelerate over the next few quarters with the region likely to hit its full stride in the second half of the year," added Neumann.

Expectations for growth in China have not budged since the last poll in January; an encouraging sign after economists consistently downgraded their outlook in the last three polls.

Asia's largest economy is expected to grow at an annual 8.4% this year and 8.6% in 2013.

China had reported its slowest quarterly growth since the tail-end of the financial crisis in the March quarter and the poll shows that was probably the trough and the economy will rebound in the coming quarters.

For India, analysts expect growth to touch 6.8% this fiscal year and 7.1% in the next which was slightly lower than the 7.0% and 7.3% in the January poll.

The survey, which covers 13 economies across Asia, showed analysts trimmed their growth expectations for Australia, New Zealand, Philippines, South Korea, Taiwan and Vietnam.

On the other hand the outlook for Singapore, Malaysia and Thailand had brightened, when compared with the last survey.

Growth for all economies polled is expected to be faster in 2013 than 2012, the sole exception being Thailand. Asian economies will remain on track for growth and could even pick up pace later this year as long as global conditions do not deteriorate rapidly.

"The past two and a half years have taught us that Asia does not need strong growth in the G3 to grow fast itself. All Asia needs is the absence of negative growth and it will do just fine," said David Carbon at DBS in Singapore.

He added that domestic demand had kept growth alive even when exports petered out in 2011, so if conditions in Europe improved, the region will see rapid growth.

Central banks will continue to try and walk the tightrope between growth and inflation with most expected to hold or start hiking rates towards the yearend, the survey showed.

"The trouble with this very benign outlook for growth in Asia is that price pressures are still bubbling away under the surface and with growth picking up they will likely break through," said Neumann. - Reuters

Chinese force: Workers at an umbrella factory in Jinjiang, south China's Fujian province. Asia's largest economy is expected to grow at an annual 8.4% this year and 8.6% in 2013.

- AFP, 28 April 2012

Views from McMillan Woods
Against a backdrop of slowing economic growth globally, Asia and other emerging economies remain relatively resilient and their moderate growth will certainly provide many opportunities for businesses to thrive in the Asian region despite the slowdown in the Chinese economy. For further information, please email to info@mcmillanwoods.com

Bank of Korea's Kim: Prepare for slower growth

NEW YORK: South Korea must prepare for slower economic growth in the years ahead as it deals with "heightened economic uncertainty at home and abroad," the head of the country's central bank said.

Bank of Korea governor, Kim Choongsoo added that the country would likely have a positive output gap even if its economy grows at 3.5% this year as expected, and that could possibly lead to inflation.

South Korea's economy, the fourth largest in Asia, "is expected to continue its solid growth, but as the growth rate is anticipated to slow down over the medium to long term, it is vital to be prepared for this situation," Kim said at a gathering of the Asia Society on Wednesday.

The output gap is the difference between an economy's actual output and the output it could achieve at full capacity.
A positive output gap means "there is some pressure from inflation from the inside," the governor said.

Last week, South Korea's central bank held interest rates steady for a 10th consecutive month.

On Monday, South Korea's central bank trimmed its economic forecast for this year to growth of 3.5%, from 3.7%, citing the global downturn and weak domestic demand.

- Reuters, 20 April 2012

Views from McMillan Woods
With the slowing declining global economic growth, Korea is no exception although the economy is somewhat still resilient to the global slowdown with an anticipated positive growth expected at 3.5% this year while in the western countries, growth is somewhat not evident. Certainly, the direction is now aimed at the Chinese economy as it may well have an impact on the other Asian and neighbouring countries. For further information, please email to info@mcmillanwoods.com

Indonesia growth seen sturdy in 2012

JAKARTA: Indonesia's strong economic growth is expected to cool only slightly this year, though fuel subsidy cuts may push the inflation rate higher, leading economists to scale back expectations of an interest rate cut, a Reuters poll showed.

South-East Asia's biggest economy may grow 6.1% this year, a forecast that is unchanged from the previous poll in January, while inflation is expected to average 5.5%, up from 5% in the last poll.

Indonesia's economy grew 6.5% last year, its fastest pace in 15 years.

The central bank will probably keep its benchmark interest rate at a record low of 5.75%, indicating that economists no longer expect another 25-basis point cut as they did in January and expect Bank Indonesia to instead use other monetary tools to manage inflation.

"The central bank will not just take a wait and see' position ... should the government have the chance to hike fuel prices, BI may still keep the policy rate unchanged and prefer to give a tightening signal through other monetary instruments, most likely the reserve requirement ratio," said Dian Ayu Yustina, economist at Bank Danamon.

The central bank held its policy rate steady on April 12 for a second straight month, as expected, and said it would raise rates of its monetary market instruments to absorb excess liquidity.

The bank lowered rates by a total 100 basis points since October to cushion the economy against the global turmoil, but refraining from further cuts as the government announced plans to hike fuel prices in April.

Indonesia's parliament rejected the government's proposal to hike fuel prices, but instead allowed it to hike subsidised fuel prices if the country's benchmark Indonesian crude price (ICP) rose 15 % above its target of US$105 a barrel on average over a sixmonth period.

Between October and March the ICP averaged $116.52 or 11% above the target, latest data from the energy ministry shows.

The government has said it wants to use some of the money saved to directly help the poor with cash payments. Growth would not be affected even if fuel prices are increased, economists said, citing the example of 2008 when the government raised fuel rates by nearly a third, pushing inflation up to 11% even as the economy grew by a healthy 6.1%.

"Although a fuel price hike will lead to inflation, there will be compensation to 18.5 million of poor households that are expected to support purchasing power.

"So, growth will still be strong in the first half," said Eric A. Sugandi, economist at Standard Chartered.

The central bank has said the inflation rate could soar to as much as 7.1% by the end of this year with a fuel price hike, but would end at 4.4% without one, within its target of 3.5% to 5.5 %.

BI still expects the economy to expand 6.3% to 6.7 % this year, which would outpace growth in South-East Asia, which the Asian Development Bank forecast at 5.2% this year and 5.7 % next year.

- Reuters, 2 April 2012

Views from McMillan Woods
With the increase in the fuel or the removal of the fuel subsidy, the fear is the inflationary effect and this may dampen the anticipated targeted growth of the Indonesian economy although the country has enjoyed its fastest economic growth of 6.5% last year and is expected to continue with this fast pace of economic growth. For further information, please email to info@mcmillanwoods.com

Indian economy to gradually recover

BANGALORE: India's economy will pick up this year, although more gradually than previously thought, while average inflation will be slower, giving the central bank room to cut rates by another 50 basis points during the fiscal year ending March 2013, a Reuters poll showed.

The survey showed Asia's third largest economy growing at an annual 6.5% in the three months to June, and accelerating to 7% in the next quarter. That is down from 6.8% and 7.1% in the January poll.

Growth is expected to clock a 7.1% rate for the fiscal year 2012-2013. The International Monetary Fund is a little more optimistic, at 7.3%. Growth for the latest fiscal year ended in March is expected to be 6.8%.

Yet even so, growth estimates have now been cut for the fifth straight quarterly Reuters poll.

The current rate, at 6.1%, is far below the near double digit rates before the onset of the global financial crisis in 2008-2009.

"One of the biggest challenges the economy has faced last year has been the policy inertia and that continues to remain," said Upasana Bharadwaj at ING Vysya Bank.

But she said the surprisingly sharp 50 basis point cut from the Reserve Bank of India this week "should provide some boost to overall sentiment and help in stimulating investment."

That was the RBI's first rate cut in three years, following a lengthy battle to bring down inflation.

Indeed, the central bank was still raising interest rates long after many others started cutting them, severely crimping growth and punishing the rupee.

Other central banks like the U.S. Federal Reserve and the Bank of England, with interest rates at the zero barrier, have resorted to printing money to shore up their economies, with limited results thus far.

With the repo rate at 8%, the RBI still has room to cut.

Even after the RBI's 50 basis point cut this week, economists now expect it to be lowered to 7 % by June next year instead of 7.5 % in the January survey.

Once considered the engine of Asian economic growth, the Indian economy in recent years has been throttled by a combination of high inflation, tight monetary policy, weak global economic conditions and lax implementation of fiscal policies and reforms.

The Chinese economy, on the other hand, is expected to grow by 8.4 % in 2012 and 8.6 % next year.

While the RBI tries to restart the investment cycle, much of the work to promote India's global investment appeal is the government's responsibility.

- Reuters, 29 March 2012

Views from McMillan Woods
It is expected that "what goes up must come down" although it's the timing factor. With higher inflation coupled with higher interest rates, these factors may be of concern to the emerging economies of Asia or are they? For further information, please email to info@mcmillanwoods.com

Philippines halts interest rate cuts

MANILA: The Philippines kept interest rates unchanged, halting after two consecutive cuts as a recovery in exports lessened the need for policy makers to add stimulus to the economy.

Bangko Sentral ng Pilipinas held the rate it pays lenders for overnight deposits at 4%, according to a statement in Manila yesterday. The decision was predicted by all 17 economists in a Bloomberg News survey.

Asian Central banks are juggling the need to boost economies hurt by Europe's debt crisis and slowing Chinese growth with increasing pressure to contain inflation fanned by elevated oil prices. While India lowered rates by more than economists forecast this weekend, Australia signalled increased prospects for its first reduction this year, more regional policy makers are holding borrowing costs steady.

"The feeling is that the central bank has done its part to stimulate growth earlier and we most likely have seen the last of rate cuts," Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG, said before the decision.

"Based on the strong export recovery we're seeing, growth this year may even be better than people expected.

Meanwhile, inflation will start picking up."

The government raised the minimum fare in jeepneys, a common form of Philippine public transport, by 6% to 8.5 pesos (US$0.20) last month. The Trade Union Congress of the Philippines sought a 90-peso increase in minimum wage, Labor Secretary Rosalinda Baldoz said on March 16.

- Bloomberg, 18 March 2012

Views from McMillan Woods
Like all the neighbouring Asian economies, the fear factors are the interest rate hikes, inflation due to removal of subsidies and price hikes which all lead to the dampening of the economic growth of a country. Philippines is no exception and drastic measures need to be taken to curb such fear. For further information, please email to info@mcmillanwoods.com

Apple now the biggest smartphone vendor

HELSINKI: Apple Inc passed Samsung Electronics Co to become the world's biggest smartphone vendor in the fourth quarter on surging sales of its iPhone, Gartner Inc said.

Almost a quarter of smartphones sold were iPhones as Apple's market share rose to 23.8% from 15.8% a year earlier, the Stamford, Connecticut-based researcher said.

Apple sold 35.5 million smartphones to consumers while Samsung sold 34 million, Gartner said.

Global sales of such handsets that use computer-like processors and can handle business email and streaming video increased 47% to 149 million units.

Apple's sequential growth may slow this quarter as pent-up demand was largely sated by holiday sales, Roberta Cozza, a Gartner analyst based in Egham, UK, said in an interview.

"The wild card for 2012 is China," Cozza said. "If Apple closes a deal with China Telecom or China Mobile they could see their units double in that market."

Gartner forecast 39% growth in smartphones this year, slowing from 58% last year. Google Inc's Android software ran on more than half of all smartphones sold, according to Gartner.

Nokia Oyi's smartphone market shall fell to 12% from about 30% a year earlier, putting it third, Cozza said. Nokia's share declined as the Finnish company shifted its focus to Microsoft Corp's Windows Phone software and phased out the 10-year-old Symbian line.

The introduction of Nokia's Lumia handsets didn't stem a decline in Microsoft's market share, which dropped to 1.9% from 3.4% in the fourth quarter, Gartner said. Cozza said she expected Windows Phone to reach an 8.6% share of smartphones by the end of the year.

Apple's smartphone success made it the world's third-largest vendor of handsets overall, passing LG Electronics Co, which fell to fifth place behind ZTE Corp. Nokia kept its position as the biggest vendor with a 23.4% share, narrowing its lead over Samsung Electronics Co to 4 percentage points.

- Bloomberg, 25 February 2012

Views from McMillan Woods
Enchanting indeed! With the purported global economy slowdown, the world mobile phone users are picking up the trend of the latest lifestyle smartphone - the Apple iPhone 4s. Certainly, it is fascinating to witness the ability and adeptness of Apple Inc to be the world biggest smartphone vendor. At McMillan Woods, we are supportive of the latest smartphone - the Apple iPhone 4s because of its "functionability" and most importantly, its user friendliness. For further information, please email to info@mcmillanwoods.com

IMF said to seek US$500bil

LONDON: The International Monetary Fund (IMF) is proposing to raise its lending capacity by US$500bil to insulate the global economy against any worsening of Europe's debt crisis, according to a person familiar with the talks.

The Washington-based lender currently has about US$385bil available to lend and wants to lift that to US$885bil after identifying the potential for a US$1 trillion global financing gap in the next two years, the person said. To incorporate a cash buffer, that means asking its membership for US$600bil.

IMF managing director Christine Lagarde said on Tuesday her staff are studying options to increase the fund's war-chest.

While euro-region nations have already pledged to contribute 150 billion euros (US$192bil), the US has said it has no plans to make new bilateral loans and G-20 leaders ended last year at odds over the issue.

The Washington-based lender is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to a Group of 20 official, who spoke on condition of anonymity because the talks are private.

- Bloomberg, 23 January 2012

Views from McMillan Woods
One may ask if there is indeed a light at the end of the tunnel. Let's hope that with this possible "bail-out" the affected countries can at least pull through and avoid the global economic catastrophe. For further information, please email to info@mcmillanwoods.com

Grim outlook cited

World Bank slashes growth expectations, warns economies

BEIJING: The World Bank warned developing countries to prepare for the "real" risk that an escalation in the euro area debt crisis could tip the world into a slump on a par with the global downturn in 2008/09.

In a report sharply cutting its world economic growth expectations, the World Bank said Europe was probably already in recession. If the euro area debt crisis deepened, global economic forecasts would be significantly lower.

"The sovereign debt crisis in the eurozone appears to be contained," Justin Lin, the chief economist for the World Bank, told reporters in Beijing yesterday.

"However, the risk of a global freezing-up of the markets and as well as a global crisis similar to what happened in Sept 2008 are real." The World Bank predicted world economic growth of 2.5% in 2012 and 3.1% in 2013, well below the 3.6% growth for each year projected in June.

"We think it is now important to think through not only slower growth but sharp deteriorations, as a prudent measure," said Hans Timmer, director of development prospects at the bank.

The World Bank said if the euro area debt crisis escalates, global growth would be about 4 percentage points lower.

It forecast high-income economies would expand just 1.4% in 2012 as the euro area shrinks 0.3%, sharp downward revisions from growth forecasts last June of 2.7% and 1.8%, respectively.

It cut its forecast for growth in developing economies to 5.4% for 2012 from its previous forecast of 6.2%, saying expansion in Brazil and India and to a lesser extent Russia, South Africa and Turkey, had slowed already.

It saw a slight pick-up in growth in developing economies in 2013 to 6%. But the report said threats to growth are still rising, suggesting the outlook remained highly uncertain.

"The downturn in Europe and weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome," it said.

It also cited failure so far to resolve high debts and deficits in Japan and the United States and slow growth in other high-income countries, and cautioned those could trigger sudden shocks.

On top of that, political tensions in the Middle East and North Africa could disrupt oil supplies and add another blow to global prospects.

It said that while Europe was moving toward a long-term solution to its debt problems, markets remained skittish.

- Reuters, 20 January 2012

Views from McMillan Woods
It is indeed worrisome that the world economy is moving towards another global slow-down as many factors are pointing towards that direction such as the still-recovering Japan from the tsunami catastrophe, slow-down in China together with the over-heating property market coupled with the political tensions in the Middle East and North Africa; and not forgetting the European sovereign debt crisis hence we need to tread with extreme caution as we take each step forward. Again, as a reminder let's be mindful of the global economic slow-down and exercise caution. For further information, please email to info@mcmillanwoods.com

Economic growth slows

Beijing records 8.9% in the fourth quarter, says statistics bureau

BEIJING: China's economy expanded by 9.2% in 2011 from a year earlier and 8.9% year-on-year in the fourth quarter, the National Bureau of Statistics (NBS) said.

The quarterly growth was the slowest in 10 quarters. China set its full-year growth target at 8% in early 2011 after its economy grew 10.3% in 2010.

The country's economy expanded 2% in the fourth quarter on a quarterly basis, NBS chief Ma Jiantang said.

The economy grew 9.1% year-on-year in the third quarter of 2011, compared with 9.5% in the second quarter and 9.7% in the first quarter.

According to preliminary statistics, the country's GDP reached 47.16 trillion yuan (RM23.4 trillion) in 2011, Ma said.

He said the country's economic performance in 2011 was "a good start" for the 12th Five-Year Plan (2011-2015) period and was in line with macroeconomic regulations.

The NBS chief said the country faced a highly complicated external environment in 2012, as the economies of the European Union and the United States remained sluggish, the global financial market was experiencing turbulence and protectionism was on the rise.

There were also a number of domestic risks, including mid- and long-term upward price pressures and funding shortages for small businesses, as well as structural changes intended to enhance energy-saving and emission reduction, he added.

Meanwhile a slowdown is expected for China's growth engine in 2012 as uncertainties continue to cast clouds over the world's second largest economy amid festering European debt woes and painstaking macro-control policies.

A slowing Chinese economy was inevitable due to weaker exports and fixed-asset investment, said Lu Zhongyuan, deputy director of the Development Research Centre (DRC) of the State Council, or China's Cabinet.

"We should no longer be obsessed with the speed of growth," said Lu.

He predicted the expansion of China's gross domestic product (GDP) would decelerate to around 8.5% in 2012.

While short-term demand shrank, China's mid- and long-term growth potential would decrease because of factors such as an aging population, rising labour costs and less room for infrastructure improvement, DRC Macroeconomic Research Department director Yu Bin said.

Yu also estimated the 2012 GDP growth would slow to around 8.5%, based on an overall stable domestic property market, barring another global financial crisis.

The direction of the European sovereign debt crisis has been closely followed by Chinese authorities, as the European Union is the country's largest trade partner.

The outlook for exports, one of the three main drivers of China's growth, was "very worrisome", said Yao Jingyuan, former chief economist with the NBS.

Zhang Xiaoqiang, the deputy director of the National Development and Reform Commission (NDRC), said China targeted about 10% annual growth in its foreign trade in 2012, significantly slower than in 2011.

However, Fan Gang, a former adviser for China's central bank, said the export outlook may be better than expected, anticipating no real recession in the European economy in 2012.

- Xinhua, 18 January 2012

Views from McMillan Woods
With the possible contraction of the world largest 2nd economy and the cascading effect of the European sovereign debt crisis, the neighbouring countries ought to exercise caution. As it has always been said, when china sneezes, the neighbouring countries would have caught a cold. Let's be mindful of the global economic slow-down and exercise caution. For further information, please email to info@mcmillanwoods.com

London: Halifax expects British house prices to be stagnant for next year

LONDON: Britain's housing market is likely to stagnant in 2012, with low interest rates offset by a squeeze on household budgets, accordingly to mortgage lender Halifax.

IN its outlook for next year, Halifax said it expected house prices to end 2012 in a range of down 2% to up 2%. Prospects for Britain's economy were "particularly uncertain" but the likelihood of the Bank of England leaving interest rates at a record low 0.5% for the foreseeable future would help support the market, it said.

"Overall. We expect continuing broad stability in house prices nationally during 2012. Prices are again likely to end the year at levels close to where they begin with the market continuing to lack any real direction," Said Halifax economist Martin Ellis.

However, demand for homes would be constrained by rising unemployment and the weak outlook for growth.

"These pressures will come from a combination of subdued earnings growth, high (but falling) inflation, the substantial fiscal tightening that is taking place and an ongoing rebalancing of household sector finances with many families seeking to reduce their debts," Ellis said.

Meanwhile, Britain had 11% more houses valued at �1mil or more available for purchase in the third quarter than it did a year earlier, Investec Specialist Bank said in a recent report.

- Agencies, 25 December 2011

Views from McMillan Woods
The coming of yet another global slowdown is already affecting businesses and it kicks off with the slowdown in real property investments. Perhaps, the advice for investors in real properties is to wait a little longer before picking up some bargains at a later date. Meanwhile, the Asia Pacific region is also affected with property prices in HK & China not predicting any further growth and at worst stagnated in the New Year 2012. For further information, please email to info@mcmillanwoods.com

Hong Kong: No big drop in HK property prices

HONG KONG: Hong Kong's property market is in a phase of adjustment and prices aren't likely to suffer a "big" decline, Standard Chartered Plc's Hong Kong chief executive officer, Ben Hung told reporters at a conference.

- Bloomberg, 28 December 2011

Views from McMillan Woods
With the global slowdown which is gradual, property prices in general are falling as seen in China and now Hong Kong not forgetting that the British house prices are being predicted to be stagnant in the New Year 2012. For further information, please email to info@mcmillanwoods.com

China plans new currency pairs for yuan trading

SHANGHAI: China's domestic foreign exchange market plans to launch trading of the yuan against the Australian and Canadian dollars, three sources with foreign banks told Reuters.

The China Foreign Exchange Trade System (SFETS) may launch the new trading pairs as soon as late this year or early next year, the source said. A spokeswoman for SFETS declined to comment.

The yuan is currently traded onshore against the dollar, euro, pound sterling, yen, Hong Kong dollar, ringgit and rouble.

China has been gradually expanding the currencies against which the yuan is traded, as it continues to take steps to internalise its currency, including launching trading against the ringgit and rouble last year.

"China needs to add direct yuan trading against the Aussie because of increasing deals between China and Australia, in particular in the mining sector," said a source at a foreign bank in Shanghai.

:Adding the Canadian dollar appears to be a move to acknowledge the importance of the Group of Seven economies as well as being part of China's efforts to gradually have trading in all major currencies versus the yuan," the sources added.

A separate official source said that China was considering eventually introducing trading of the yuan against all major foreign currencies.

The yuan has attracted increasing international attention as China's economy surpassed Japan's to become the second largest in the world. The yuan is not fully convertible under the capital account but China has made efforts to raise the international status of its currency over the past couple of years.

For one, the government has turned Hong Kong into a centre for offshore yuan, as more and more trade is conducted in the renminbi, the official name of the currency, leading to the creation of bigger and bigger yuan pools outside mainland China.

- Reuters, 25 November 2011

Views from McMillan Woods
Now that China has taken over from Japan as the World second largest economy, the dragon has indeed awakened and the world needs to take China seriously. At this rate, is it possible for the US that the world economy may well be China, as the impetus of the world growth is now is Asia Pacific? India is doing equally well. So watch out US! For further information, please email to info@mcmillanwoods.com

China appoints new financial regulators

SHANGHAI: China has appointed new chiefs of its three main financial regulators, state media reported, in a periodic shuffle of officials by the ruling Communist Party.

The move comes as China struggles with slowing economic growth and persistently high domestic inflation, which has prompted the government to keep a tight grip on credit.

- AFP, 31 October 2011

Views from McMillan Woods
Well, well, well, with the awakening of the dragon, the overzealous measures in the country rapid economic expansionary plans have now tired the dragon and the fastest growing economy in the region is now going on a slowdown. Let's hope the Chinese economy is not overheated. For further information, please email to info@mcmillanwoods.com

Malaysia - Yuan to be main trading currency

KUALA LUMPUR: An academician has predicted that the Chinese Yuan will replace the US dollar as the main trading currency in 10 to 15 years.

China Europe International Business School dean, Dr. John Quelch said the emergence of China as one of the world's major economies amid the slowdown in the Western economies could foster the country's currency role as the main trading medium in the future.

Quelch said this in a session titled "Mapping Global Growth" at the 11th Forbes Global CEO Conference here yesterday. He was one of the panelists at the session.

Meanwhile, Globis University president and dean, Yoshito Hori forecast that the United States could recover from its current economic crisis within five years, unlike the Eurozone which could take up to 10 years.

- Bernama, 30 September 2011

Views from McMillan Woods
It would seem likely that with the might of China, the Chinese Yuan may well be the next major trading currency although it must be said that in the past years, the Japanese Yen was supposed to be the main trading currency in Asia but that never took place. For further information, please email to info@mcmillanwoods.com

Hong Kong predicted to fall into recession

HONG KONG: Hong Kong's export-led economy, a barometer of global growth, is sinking into a recession that is likely to last for a year, said Daiwa Capital Markets economist Kevin Lai.

Of nine economists in a Bloomberg survey, Lai came closest to predicting a 0.5% contraction in the city's economy in the second quarter.

Only two of the analysts expected gross domestic product to decline from the previous three months. The government released the data on Aug 12.

"Global demand is really weak and we expect the United States and Europe will see a sharp slowdown, or near-zero growth, next year," Lai said in a phone interview in the city yesterday. "A recession is a reality for Hong Kong."

An 11% decline in Hong Kong's merchandise exports in the second quarter from the previous three months highlighted the weakness, Lai said. In a note, he described the economy as the world's "most externally-driven" and said that a slump had "grave implications."

The technical definition of a recession is two straight quarters of contraction.

Lai predicted that Hong Kong's economy would contract 1% over the 12 months ending March 31. That compares with a decline of 7.9% in the year through the first quarter of 2009, when the global financial crisis hobbled trade.

In Hong Kong, there are signs that the property market is cooling. Home transactions fell to a 30-month low in July while a land auction last week missed surveyors' forecasts.

- Bloomberg, 18 July 2011

Views from McMillan Woods
This contraction of property prices and the possible recession is not just happening in Hong Kong but generally in Europe and the United States which has grave consequences. At the end of the day, we believe that so long as the investment is in prime location and is held for long term, such action would allay any fear. After all, what goes down must eventually rise to the occasion. For further information, please email to info@mcmillanwoods.com

Indonesia: Tax holiday - The scheme for major direct investors is intended to spur record levels of FDI

JAKARTA: Indonesia will give a tax holiday for investors committing at least one trillion rupiah (US$117mil) into sectors including metals and energy, an effort to spur record levels of foreign direct investment in South-East Asia's biggest economy.

The G-20 member aims to become a world top 10 economy by 2025 through boosting investment, improving infrastructure and developing industries that add value to its position as a leading producer of resources such as tin, palm oil and coal.

Finance Minister, Agus Martowardojo said he would issue a regulation on the scheme, which will cover base metals, oil refining, petrochemicals, renewable energy, machinery and telecoms equipment.

This would exempt investors from paying taxes for between five and 10 years after their companies start operations, though the duration was still being discussed, he said.

Existing investors that had operated commercially for less than one year may also ask for a tax holiday, he added.

"The impact will be huge. It can help us reach our 2011 investment target," said the country's investment chief Gita Wirjawan, referring to a target to get 240 trillion rupiah of investment this year.

Some investors have announced plans to build manufacturing plants in the country but have been waiting for the details of the mooted tax holiday scheme before starting operations.

Planned investments include US$6bil in a joint-venture steel plant by South Korea's POSCO, the world's No. 3 steelmaker, US$4.5bil by South Korea's Honam Petrochemical Corp for a petrochemical complex, and US$8bil-US$9bil from Kuwait Petroleum Corp to build a new oil refinery.

Foreign direct investment surged 21% in the second quarter of 2011 from a year earlier as strong commodity prices attracted investors into the mining sector, even without a tax holiday.

Purbaya Yudhi Sadewa, economist at Danareksa Research Institute in Jakarta, said the tax holiday was a good strategic move for the sectors chosen.

"I don't think we have to question that we're losing money from tax for five to 10 years - if they don't come we still don't get it anyway... On oil refining it could help cut fuel shipments to Indonesia as we haven't built any new refinery since the 1990s," he said.

The oil producer's ageing refineries mean it relies on petroleum and diesel imports from neighbour Singapore to meet its growing fuel demand.

Chief Economics Minister Hatta Rajasa said the government was also planning this month to revise an existing tax allowance regulation for smaller investments, involving either 50 billion rupiah and 300 workers or 100 billion rupiah and 100 workers.

Martowardojo said if the investors already had this tax allowance they would be exempted from getting the tax holiday.

- Reuters, 16 August 2011

Views from McMillan Woods
Such positive move by the Indonesian Tax Authority would certainly enhance the already dynamic economic development of the country. In the long run, with higher business income, it would ultimately lead to a higher tax collection - A win-win situation. For further information, please email to info@mcmillanwoods.com

London: House prices in England, Wales slump again

LONDON: House prices in England and Wales ticked down again in July and are expected to fall further despite signs that demand is picking up somewhat, a survey by property data firm, Hometrack showed on Monday.

Prices fell by 0.1% for a third month in a row, Hometrack said, which left then 3.9% below last July's level.

Richard Donnell, director of research at Hometrack, said that while prices are likely to ease further, the market was showing signs of stabilisation as sellers became more realistic about possible deals.

Donnell noted that the gap between houses on offer and demand closed to reach its lowest level in eighteen months in July as more buyers entered the market.

The number of sales agreed in England and Wales had increased by 20% in the last two months, he said.

Hometrack put the increase in buyers down to low interest rates and growing number of people who want to move home four years into the economic downturn.

London and East Anglia bucked the general trend, recording a price increase of 0.3%.

House prices are widely expected to fall further because high inflation, rising taxes and slow wage increases squeeze households' budgets.

- Reuters, 27 July 2011

Views from McMillan Woods
We are of the view that property market is dependent on three prime factors and these are location, location and location! One of our McM members recently visited a certain part of London and found that key choice location is holding on well to its property prices if not enjoying a slight increase in its property investment. For further information, please email to info@mcmillanwoods.com

Hong Kong: HK authority said to be eyeing London, Paris office properties

HONG KONG: The Hong Kong Monetary Authority (HKMA) is planning to buy US$500mil worth of office properties in London and Paris as part of a drive to increase its investment in Europe, the Times reported on Monday without citing sources.

The newspaper said that HKMA will increase its exposure in the two European capitals through the Exchange Fund, an investment vehicle HKMA manages.

The HKMA declined to comment on the report.

"We do not comment on the specifics of the investment operations of the Exchange Fund because of the market-sensitive nature of the information" a spokeperson for the HKMA said.

The newspaper said the fund purchased its first building in London's city financial district this year, while JP Morgan Asset Management's �260mil (US$424mil) acquisition of 10 Aldermanbury Square was on behalf of HKMA's investment portfolio.

The Times said it believed that other potential investment advisers and fund managers have been approached to help the fund to secure further office investments.

Last week, HKMA said the total asset of the Exchange Fund, which is used to back the Hong Kong dollar, amounted to HK$2,433.2bil (US$312.23bil) at end June 2011, an increase of HK$88.2bil from the end of 2010.

- Reuters, 27 July 2011

Views from McMillan Woods
We are of the view that the old adage of "What goes down must come back up!" stands.
At the end of the day, it's all down to "timing!" For further information, please email to info@mcmillanwoods.com

New Delhi: Manmohan's "aging" Cabinet raises concern

NEW DELHI: India's 78-year-old Prime Minister Manmohan Singh has long promised to introduce young blood into his inner team but after a reshuffle last week the average age of the Cabinet has risen to 65.

Fourteen of the 33-member body, are in their 70s - well past the public sector retirement age of 60 - including Foreign Minister Pranab Mukherjee, 76.

The other major portfolio is held by Home Minister P. Chidambaram, whop at 66 is positively youthful by comparison.

In a rapidly modernising country where half of the population is under 35, accordingly to official statistics, the policy of favouring the wisdom of age over the energy of youth is increasingly being questioned.

Analysts suggest the lack of fresh faces in prominent positions might reflect the lack of talent in India's increasingly family-dominated politics - or it could be a tactic to prepare the stage for a new leader from the Gandhi dynasty and keep out rivals.

- AFP, 26 July 2011

Views from McMillan Woods
We at McMillan Woods Global have always been on a look-out for younger talented members to join the global network. Certainly, we strive to provide younger members an opportunity to propel their career and where possible to head various divisions so as to allow them to excel. For further information, please email to info@mcmillanwoods.com

Asia: Economists still hopeful - Asia confident US will strike last-minute debt accord

ASIA: Policymakers worldwide oscillated between hope and confidence yesterday that US lawmakers will break a debt impasse that threatens to trigger a default and upend global financial markets.

Asia, which holds close to US$3 trillion in US government debt, has a powerful vested interest in Washington finding a workable compromise.

Policymakers and economists expected lawmakers would strike a last-minute deal to avert a crisis.

The political brinkmanship hit world stocks yesterday and pushed money into safe-haven gold and Swiss francs, ending a brief relief rally over Greece's second bailout package, although there was no sign of panic.

But with just eight days left before Aug 2, when the Treasury Department has estimated it will run short of money to pay all of its bills, the worry level was rising.

"Those in direct charge of reserves operations must be more nervous than before, but nobody thinks Americans will choose suicide when they have known solutions," said a senior official at the Bank of Korea, who spoke on condition of anonymity.

Fresh from pulling together a new bailout of debt-ridden Greece, Berlin also expected Washington would raise its debt limit.

"We have ... followed the debate in America with great interest and we continue to remain confident that a compromise can be reached," German government spokesman Christoph Steegmans told a news conference.

Others were less sanguine, and much blunter.

"The irony of the situation at the moment ... is that the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the Eurozone," British government minister Vince Cable said on Sunday.

Asian sources said finding a solution was primarily a matter of mustering political will rather than securing rescue funding, which can be far more complicated, as Greece's crisis has shown.

"They will definitely reach a compromise," said Xia Bin, an academic adviser to the People's Bank of China. "Don't worry too much about it."

China is the largest foreign owner of US government debt, with US$1.16 trillion as of May, so a vote of confidence from Beijing carries significant weight.

A senior Indian government official said the Obama administration and lawmakers must be well aware of the consequences for global markets of failing to reach a deal.

"If you look at the world markets, they are jittery though they have not nosedived," the Indian official said.

Australian Treasurer Wayne Swan said a protracted debt ceiling debate added uncertainty to the global economy.

US Secretary of State Hillary Clinton, speaking in Hong Kong, said she believed Congress would secure a debt deal and "work with President Obama to take steps to improve our long-term fiscal outlook."

- Reuters, 24 July 2011

Singapore: No escape for Asia - Region will be exposed to US debt downgrade or default

SINGAPORE: For Asia, the deepening debt troubles in the West are like a giant asteroid on a collision course - too big to dodge or ignore and yet difficult to pinpoint where the worst damage will be done. With roughly US$3 trillion of reserves held in the form of US Treasury debt - more than US$2 trillion in China and Japan alone - Asia would be directly exposed to a US debt downgrade or default.

The sheer size leaves Asia with nowhere to hide.

"Where could these investors go to put that amount of cash to work? Answer: nowhere," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi USF in New York.

Government officials in Asia said in interviews that there was little they could do but wait and hope for the best as Washington struggles to find a politically palatable agreement by Aug 2 - the date the US Treasury said it would run short of money to pay bills - to avoid a default and satisfy ratings agencies.

Some officials sounded more worried about risks emanating from Europe, where debt fears have spread beyond Greece, Ireland and Portugal to a much larger economy, Italy.

"Holding onto Treasuries could cause some capital losses in case of a downgrade, but we could live with it," said a senior Japanese government official who spoke on condition of anonymity because he was not authorised to speak to the news media about contingency planning. "We have no problems investing in sub-AAA-rated bonds," the Japanese official added. "Besides, what else should we buy by selling dollars? Euros? Would that be a safer investment than the dollar?"

Japan's worry is that the yen would strengthen against the dollar or euro if debt troubles worsen which would hurt Japanese exports and constrain economic growth.

The biggest concern for Asia would be a global panic, similar to what followed the bankruptcy of Lehman Brothers in 2008. Although Asia fared better than the United States or Europe in that episode because its banks had little direct exposure and its public finances were healthy, a US default today would be a direct hit.

Not only would the region's Treasury holdings be at risk but investors would most likely pull money out of emerging markets, too, even though their growth prospects look healthier than those in many of the advanced economies.

Banks that count on Treasury securities for ultra-safe reserves might have to curb lending or sell riskier assets to bolster capital.

A US debt downgrade could also have wider repercussions. Funds that invest only in AAA-rated debt would be forced to sell. The ratings agency Moody's has put 7,000 US municipal bond issues on review because they have direct links to US debt.

Asian financial markets could take a beating as well. The Federal Reserve chairman Ben S. Bernanke pointed out last week that Treasury securities were often used as collateral, so a default could throw the entire financial system into "chaos," as he put it.

Foreign exchange markets in Asia look particularly vulnerable because many investors bet with borrowed money. Individuals can easily obtain foreign exchange trading accounts allowing them to bet US$100 for US$1 they put up. That cushion could be quickly wiped out in the case of a US default.

Chris Krueger, a research analyst at MF Global in Washington, said that as of last Friday he saw a 40% chance that Congress would fail to raise the US debt ceiling by Aug 2. But despite the potential for massive upheaval, several Asian policymakers said they had no formal contingency plans for that possibility.

The South Korean finance minister, Bahk Jae-wan, said on Friday that his country was not drafting plans for how to cope with a US default, believing that American lawmakers would eventually work out a solution.

Financial markets appear to have drawn the same conclusion. The yield on 10-year US government bonds is under 3%, indicating investors still see them as a haven.

But for both the United States and Europe, the biggest impediment to resolving debt troubles is political, not economic. That makes it even trickier to predict the outcome.

A fallback plan gaining momentum in the United States would avert a default by allowing President Barack Obama to raise the country's borrowing limit before the Aug 2 deadline.

- Reuters, 23 July 2011

Frankfurt: Global economic confidence rises in Q2

FRANKFURT: Confidence in the global economy increased in the second quarter as analysts grew more optimistic about the European environment. Germany's Ifo research institute said, citing a quarterly survey.

An index measuring global economic sentiment rose to 107.7 from 106.8 in the first quarter, Munich-based Ifo said in the World Economic Survey published yesterday. A measure of current conditions jumped to 108.4 from 102.8, while a gauge of expectations fell to 107 from 110.5.

"The increase is the sole result of more favourable assessments of the current economic situation," Ifo said.

"The survey results indicate that the recovery of the world economy will continue in the coming six months although at a somewhat weaker pace."

The International Monetary Fund on April 11 forecast the global economy to expand 4.4% this year after growing 5% in 2010. In Europe, exporters have helped fuel a German-led recovery as fiscal belt-tightening and rising energy costs curbed consumer demand.

Analysts surveyed raised their global inflation forecast for this year to 3.8% from a previously projected 3.4%, the report showed. A larger share of participants forecast central banks around the world to raise borrowing costs over the coming six months, Ifo said.

- Bloomberg, I June 2011

New York: China's Longtop says auditor, CFO quit

NEW YORK / BANGALORE: The auditor at Longtop Financial Technologies Ltd quit and a US regulator has opened a related probe, deepening concern about possible accounting irregularities at Chinese companies.

The resignation on Sunday of the auditor, Deloitte Touche Tohmatsu CPA Ltd, came three days after Longtop, which makes software for Chinese financial services companies, said its chief financial officer offered to resign.

Based in Xiamen, Longtop had a US$1.08 billion (RM3.30 billion) market value before a May 17 trading halt in New York, though that value had fallen by more than half since November.

It is among the largest of several Chinese companies - such as China MediaExpress Holdings Inc - that were hit recently by accusations of accounting fraud, including from short-sellers or regulatory probes.

According to Longtop, Deloitte said its resignation stemmed in part from "recently identified falsity" in Longtop's financial records, as well as "deliberate interference" by Longtop management in the audit process.

Longtop also said Deloitte could no longer rely on its prior audit reports for the company.

Separately, Longtop said the US Securities and Exchange Commission has opened an inquiry. It intends to cooperate, and has hired legal counsel and authorised the hiring of forensic accountants to examine matters raised by Deloitte.

Longtop said it is also considering whether to accept the resignation of CFO Derek Palaschuk, offered on May 19.

Palaschuk said he quit the board of Renren Inc three weeks ago, just before it went public on May 4, to protect the Chinese social networking company from any fallout from accounting fraud accusations at Longtop.

"It doesn't appear that Chinese companies have withstood the types of scrutiny by auditors that American companies have faced - for decades," said Richard Riley, an accounting professor at the West Virginia University College of Business & Economics in Morgantown, West Virginia.

"As these companies get bigger, they get more attention, and inconsistencies, anomalies or things that don't make sense may become more apparent."

- Reuters, 31 May 2011

China: Goldman cuts China growth forecasts

BEIJING: Goldman Sachs has trimmed its economic growth forecasts for China to 9.4% this year, from 10% previously, citing a recent run of surprisingly weak data, high oil prices and supply constraints.

"The growth slowdown has been even sharper than we forecast, especially evident in April industrial production," Goldman said in a research note to clients. "In addition, inflation is not coming down as rapidly as we hoped."

The US bank predicts China's annual inflation will peak at 5.6% in June, with average annual inflation hitting 4.7% in 2011.

- Reuters, 30 May 2011

Mauritius: Banks cushion exceeds Basel III requirements, IMF says

The IMF observes that the Mauritian banking sector has withstood the global downturn well. Banks have remained liquid and well-capitalised, even above the proposed Basel III requirements, the institution highlights in its last Public Information Notice [PIN] on the Mauritian economy.

The IMF concluded the Article IV consultation with Mauritius on 14 April 2011. The findings are summarized in the PIN. The IMF Article IV consultation process is considered as a key review of national economic performance.

Despite ongoing economic challenges, the share of non-performing loans [NPL] decreased and banks were profitable with 16.7 percent return on equity in 2010 despite low leverage ratios. Stress-tests conducted by the Bank of Mauritius [BOM] in June last year concluded that domestic banks would be resilient to significant increases in NPLs and losses on large exposures.

Government will soon introduce a deposit insurance scheme to strengthen the prudential systems of the banking sector.

On the monetary front, IMF recommends the Central Bank to closely monitor inflationary pressures and to act accordingly. The IMF is therefore not expecting a loosening of interest rates, as a monetary stance geared towards combating inflation would keep second round effects of inflationary pressures under check. "With the appropriate early monetary policy response and wage restraint, the second round effect of imported inflation should be limited", the PIN says.

The IMF commended government efforts in soundly handling the economy in the face of global recession, more especially in the country's main markets in Europe. The fiscal and monetary stimulus measures have been extremely beneficial to keep economic activity afloat.

It considers that the Mauritian economy will deliver a good performance in 2011 with a growth rate in excess of 4 percent. However, we are not out of the woods as yet. "Going forward, the largest risks to growth would come from shocks to external demand, particularly tourism and FDI" the IMF warns. The full article can be accessed on the following link:

http://www.imf.org/external/np/sec/pn/2011/pn1149.htm

Should you wish to discuss the above further, feel free to contact us on info@mu.mcmillanwoods.com

- 15 May 2011

Mauritius: Prices will accelerate throughout 2011, Inflation Report says

There are little signs that inflation will reduce pace in 2011, according to the latest Inflation Report issued by the Bank of Mauritius [BOM]. "Taking into consideration latest developments with regard to food and energy prices, inflation risks remain on the upside for 2011", the report observes.

We therefore take the view that monetary policy will remain focused on inflation risks, rather than geared towards supporting economic growth. Key Repo rate will remain either unchanged at 5.25 percent or will be increased at the next Monetary Policy Committee [MPC] meeting. Any possibility of reduction in interest rates should be ruled out.

Higher food and energy costs will eat into people's discretionary spending and will reduce propensity to save. Debt servicing by families will also be constrained.

The Inflation Report points to the diverging signals regarding monetary policy across the globe. Given anemic economic activity in US and in the UK, authorities maintain the loose monetary conditions, whilst Europe has started reversing monetary loosening. In the emerging world, which is in fact driving global recovery, inflation has become much of a problem.

Recent geopolitical disturbances in North Africa and the Mid-East region have increased the risks to the oil inflation outlook.

Several central banks in emerging economies, and Asia in particular, started raising interest rates to keep inflation under control. Other liquidity management tools such as cash reserve requirements were also used in efforts to curtail the effects of capital inflows on the economy.

India and China which are Mauritius two main sources of merchandise imports are hit by high inflation. Rising prices in these countries are likely to feed into domestic prices and keep inflation on the high side.

The political consequences of the killing of Osama Bin Laden by US forces are yet to be assessed. Nonetheless, given the sensitivities involved, we should expect a rise in terror risks in the Muslim world and especially in the Arab world where political tensions are already high. Safe haven currencies like the USD and the Japanese Yen may appreciate in a context of heightened insecurity.

A stronger greenback will create more inflation in Mauritius as the bulk of our merchandise imports are paid in USD.

The Year-on-Year inflation in February 2011 stands at 6.8 percent, compared to 2.4 percent a year ago.

The full report can be downloaded on the following link: http://bom.intnet.mu/?ID=74002

- 3 May 2011

Thailand: Thai economy likely to expand

BANGKOK: Thailand's economy is expected to expand around 2% in the first quarter from the fourth quarter of last year, the Finance Ministry said.

Ministry officials earlier told news conference that they expected economic growth in the first quarter of 2011 to be 2% - 3% year-on-year.

- Reuters, 2 May 2011

UK: Budget surplus swells on taxes

LONDON: Britain's budget surplus in January 2011 was the largest since July 2008, as government revenue surged in the biggest tax-collection month of the year.

Revenue exceeded spending by �3.74bill, compared with a deficit of �1.27nil a year earlier, the Office for National Statistics said in London yesterday. The median of 13 forecasts in a Bloomberg survey was for a surplus of �100mil. The surplus including government support for banks was �5.25bil.

The figures suggest borrowing this year will be less than the government forecast three months ago.

They reflect a bumper month for receipts, with the government receiving a fifth of all taxes on company profits. It also gets final payments of income tax for the previous fiscal year and early payments if tax and national-insurance contributions on bank bonuses.

- Bloomberg, 15 April 2011

Japan: Bourse warned of raising ASX offer

TOKYO: The Singapore Exchange should not raise its already generous offer to buy Australian bourse operator ASX because that would bring unacceptable dilution for its shareholders, said the chief executive of the Tokyo Stock Exchange (TSE), which owns a 5% stake in the Singapore bourse.

"The offer now looks big, and we can't be happy with the dilution if it is raised further," Atsushi Saito said at a regular news briefing at the TSE.

SGX faces pressure to sweeten its US$7.9bil offer for the rival Australian bourse to counter opposition to the deal from politicians and win regulatory approval, which requires an agreement to lift a 15% cap on foreign ownership.

- Reuters, 12 April 2011

Malaysia: UAE developers plan RM2b REITs

Firms from Persian Gulf to sell Islamic REITs here

KUALA LUMPUR: Two property developers from the United Arab Emirates (UAE) are planning to list Islamic Real Estate Investment. Trusts (REITs) worth a combined RM2bil in Malaysia this year, an exchange official said.

The companies would be the first from the Persian Gulf to sell Islamic REITs in the South East Asian nation, said Raja Teh Maimunah, Global Head of Islamic markets at Bursa Malaysia Bhd, which manages the country's stock and bond exchanges. The portfolio of properties included residential and commercial real estate in the UAE, she said.

Property prices have slumped more than 60% in Dubai, the second biggest of the seven UAE sheikdoms, since their peak in 2008 as the global financial crisis that froze credit markets slashed demand. Malaysia is attracting overseas investors from the Middle East as the political turmoil in the region boosts appetite for assets in the world's biggest market for sukuk, or syariah - compliant bonds.

"Liquidity becomes a challenge for them after the global financial crisis and so they're looking at our market," Raja Teh said in an interview here.

Dubai had submitted a formal application to Malaysian authorities to issue ringgit-denominated sukuk locally, she said, declining to give more details, Gulf Investment Corp, the investment company owned by the six Gulf Cooperation Council states, sold RM600mil of Islamic bonds in January.

Dubai might sell bonds this year and a Malaysian offering was possible, Abdulrahman Al Saleh, Director General of the emirate's Department of Finance, said on Dec 14, two months after Prime Minister Datuk Seri Najib Tun Razak announced Dubai's proposal for a multi-currency sukuk programme.

- Bloomberg, 30 March 2011

Hong Kong: Asia captures lion's share of big IPOs

HONG KONG: A bank whose customer base if larger than the population of the United States, a French cosmetics maker, a microlender and a Chinese pharmaceutical company that makes an anti-coagulant derived from pigs' guts: Asian stock exchanges have seen it all this year.

And it is not just the variety of stocks on offer. It is the sheer number of companies rushing to market in Asia and the huge amounts they are raising. General Motors may have raised US$23.1bil in its initial public offering - but it is fast-growing Asia, not Wall Street that has had most of the world's new listings this year.

Eight of the 10 largest market debuts in the world this year took place on Asian stock exchanges. Two of the biggest - for American International Assurance (AIA), the Asian unit of American International Group and the giant lender Agricultural Bank of China - each raised more than US$20bil. That is about 3 times as much as the total amount raised in 70 share listings in North and South America during the 3rd quarter of this year.

"The rise of Asia has been accelerating since the financial crisis," said Vikram Mahjotra, co-head of investment banking for the Asia-Pacific region at Credit Suisse in Hong Kong.

In 2000, 21.5% of all IPOs globally, in terms of value, were raised on stock exchanges in the Asia-Pacific region. This figure has climbed to 64% according to data compiled by Dealogic. The Americas, which in 2000 accounted for 41%, have dropped back to 20% - even with the GM issue.

And despite the recent market nervousness, which has prompted at least two companies in Asia to out their IPO's on ice, the total value of IPOs in the region this year could match, or even exceed the boom year of 2007, many investment bankers said.

In terms of volume, "this could be the best year ever for Asia, outside Japan," said Ashok Pandit, co-head of equity capital markets for Asia at Deutsche Bank in Hong Kong. And 2011, he added, could be just as strong.

And it is not just Asian companies that are going public in the region. L'Occitane, the French cosmetics maker, and Rusal, the aluminium giant controller by a Russian oligarch, Oleg V. Deripaska, were among the first to seek primary listings in HK - rather than in Paris or Moscow - this year. Last week, Caterpillar issues a Yuan-denominated bond for about US150mil, highlighting how important a location Asia has become for other forms of issuance too.

The reason for all this activity is that Asia - outside Japan - is enjoying stellar economic growth. Investors are eager to secure exposure to Asian markets - and with interest rates still low in many parts of the world, there is plenty of cash looking for potentially higher returns in the region.

All this has helped send stock markets across the region higher this year and ensured that even large listings like that of AIA in October were heavily subscribed.

In Europe and the US, by contrast, economies are still struggling to gain speed, while jitters about the debt levels of countries like Ireland and Greece have affected sentiment.

"There was a lot of caution in the markets during the 1st seven months of the year," said Todd Marin, the head of investment banking in the Asia-Pacific region, excluding Japan, at JPMorgan Chase. "But since August, we've seen a huge amount of cash looking for a home - and Asia comes out looking very appealing."

The flow of capital into Asian assets has been so rapid that some analysts said asset bubbles were in the making. But most, said the Asia was not quite there yet and that the rally in Asian stock markets - and IPOs - still had some way to run.

"Tactically speaking, there may be too much froth at present," analysts at Citibank wrote in a recent note. "But we are strongly of the belief that markets are not in bubble territory."

The Asian share of global mergers and acquisitions (M&As) has also grown. The region is not quite as dominant in this field as it is in share listings, but the last few years have seen overseas companies making more purchases in Asia and Asian companies becoming more active acquirers. Nearly 23% of M&As globally by value have been on assets in the Asia-Pacific region this year, according to data compiled by Thomson Reuters. That is up from 21.8% in 2009. Similarly, 25% of purchases so far this year were staged by Asian-based acquirers, up from 21% last year.

- IHT, 5 December 2010

US: Deflation disappears as market shows no double dip

NEW YORK: The bond market is showing Federal Reserve Chairman, Ben S. Bernanke will succeed in sparking inflation after the smallest gain in core consumer prices in half a century increased concerns that the economy will deflate.

Expectations for rising consumer prices have increased faster in the United States than any other bond market this month as central bankers made the case for monetary easing through additional asset purchases.

Yields on 30-year Treasuries climbed as much as half a percentage point since September to 2.61 percentage points more than similar maturity inflation-indexed debt, the wildest gap since May and an indication for anticipated gains in consumer prices.

While central banks are typically more concerned about faster inflation, the worst financial crisis since the Great Depression has made sustained price declines a bigger concern.

Fed policymakers, who already cut interest rates almost to zero and bought US$1.7 trillion of securities, are discussing more purchases of Treasuries to flood markets with cheap money as well as strategies for raising inflation expectations to prevent stagnating prices from undermining the recovery.

"It's like a Harry Potter movie," said Mitchell Stapley, the chief fixed-income officer for Fifth Third Asset Management, referring to the films based on the best-selling novels about the adolescent wizard by J.K. Rowling.

"They create money out of nothing. Over the short-term, there might not be an impact but certainly we are feeling that at some point they will get traction. There will be success further down the road.

Stapley, who helps manage US$22bil in Grand Rapids, Michigan, has been buying Treasury Inflation-Protected Securities (TIPS) even though the Labor Department reported on Oct 15 a smaller-than-forecast increase of 0.1% in the cost of living for September.

Core prices, which exclude food and fuel, were little changed in September, capping a 0.8% increase in the past 12 months, the smallest year-over-year gain since 1961.

- Bloomberg, 1 November 2010

China: Self-made and world's richest

BEIJING: More than half of the 20 richest self-made women in the world are Chinese, with their average fortune beating that of US talk show host Oprah Winfrey and author J.K. Rowling, a list showed.

The three richest women on the planet are Chinese, led by paper-recycling queen Zhang Yin, who has a personal fortune of US$5.6bil (RM17.4bil), according to the Shanghai-based Hurun Report, which compiles data on wealthy individuals.

Of the 20 richest self-made female billionaires, 11 are Chinese with an average wealth of US$2.6bil (RM8bil) compared with Winfrey who ranked ninth on the list with US$2.3bil (RM7.1bil), the report said yesterday.

Rowling, author of the wildly popular Harry Potter books, was at the bottom of the list, with US$1bil (RM3.1bil).

"There is no other country that comes even close to touching the number of self-made women in China. They are now head and shoulders above any other country," said Rupert Hoogewerf, founder and compiler of the Hurun rich list.

The list includes three billionaires from the United States, three from Britain and one each from Italy, Russia & Spain. The richest non-Chinese person on the list was Rosalia Mera of Spanish clothing store Zara with US$3.5bil (RM10.8bil).

Hoogewerf partly attributed the success of Chinese women in business to the government's one-child policy and free childcare provided by many grandparents, which has enabled them to spend time building their empires.

Hoogewerf added that China's long acceptance of women working outside the home had been another factor in their success.

- AFP, 2 November 2010

UK: KPMG under probe in Britain over audits of BAE

LONDON: KPMG International's UK unit is being investigated by Britain's accounting regulator over its audits of BAE Systems Plc, the defence company that has agreed to plead guilty to bookkeeping irregularities.

The probe would cover KPMG's audits from 1997 to 2007 and relates to commissions paid by London-based BAE through "any route to subsidiaries, agents and any connected companies," the Financial Reporting Council said yesterday on its website.

"The firm does not believe there has been any act of misconduct," Mark Hamilton, a KPMG spokesman in London, said yesterday in an e-mailed statement. "It will of course be cooperating fully."

BAE, Europe's largest defence company, in February agreed to pay almost US$450mill to resolve bribery and fraud probes by US prosecutors and the UK's Serious Fraud Office.

The company pleaded guilty in the US and has agreed to plead guilty in the UK to accounting irregularities.

The investigation covers advice of tax work by KPMG related to commission payments from BAE as well as the "status, operation or disclosability" of entities tied to BAE known as Red Diamond Trading Ltd, Poseidon Trading Investments Ltd and Novelmight Ltd, according to the statement. The probe is being conducted by the regulator's Accountancy and Actuarial Discipline Board.

The accounting watchdog hadn't indicated "that it has any basis for reaching a view that there is any material inaccuracy in any of the company's accounts," BAE spokeswoman Leonie Foster said yesterday in a phone interview.

BAE agreed to pay US$400mill to the United States and plead guilty to one count of conspiring to make false statements. The company also agreed to pay a �30mil fine in the UK for failing to keep proper payment records.

The settlements resolved years of probes into BAE's dealings in countries including Tanzania, South Africa and the Czech Republic.

A settlement of the matter was delayed while two anti-arms groups sought unsuccessfully to block the deal.

The SFO scrapped its probe into BAE in 2006 over bribes allegedly paid to win deals in Saudi Arabia after then-prime minister Tony Blair said charges might harm relations between the two countries, posing a threat to national security.

The Financial Reporting Council earlier this month started separate investigations of PricewaterhouseCoopers LLP and Ernst & Young LLP over their reports on customers' compliance with UK rules to protect client money.

The probes relate to PwC's work for JPMorgan Chase & Co's London unit and Ernst & Young's reports for a UK-based unit of Lehman Brothers Holdings Inc.

- Bloomberg, 3 November 2010

US: IPOs in Asia grab record share

NEW YORK: Record demand for initial public offerings in Asia is reducing the share of US IPOs to an all-time low as companies from China to Malaysia and India flood the market with more equity than ever.

Jiangsu Rongsheng Heavy Industry Group Co, Petronas Chemicals Group Bhd and QR National Ltd are preparing to sell more than US$10bil of shares as soon as next month, adding to the US$134bil raised in 2010.

Hong Kong's AIA Group Ltd and Coal India Ltd raised almost the same amount this month as all US deals this year as the share of American IPOs dwindled to 11%.

Investors are paying 24 times next year's profits twice the average for US equities, because revenues for newly listed Asian companies are forecast to increase five times as much, according to William Blair & Co and Deltec Asset Management.

The world's fastest economic growth and record-low bond yields would boost demand for Asian IPOs as American rivals recover from the longest recession since the Great Depression, Deltec says.

Asia "is an environment ripe for raising capital and ripe for investing," said Joe Carson, a New-York-based economist who helps oversee AllianceBernstein LP's US$1.2bil Global Thematic Growth Fund.

"It's based on expectations of strong growth."

The region's share of initial offerings has increased almost sixfold since 1999, when it accounted for 12% of sales.

The amount raised by US IPOs has declined 75% in the same span. Chinese IPOs led the increase, attracting US$76bil this year.

Jiangsu Rongsheng Heavy, the shipbuilder based in China's Jiangsu province, was seeking to sell as much as US$1.5bil in shares by the end of the year, according to three people familiar with the IPO.

Six other Chinese offerings have already raised at least US$1bil this year.

Agricultural Bank of China Ltd of Beijing sold US$22.1bil of shares in Shanghai and Hong Kong last quarter in the world's biggest IPO on record.

No company in the US has raised more than US$700mil this year.

Companies from China and India account for six of the ten best-performing IPOs on US exchanges this year.

Petronas Chemicals, a unit of Malaysia's state oil company, was seeking US$4.2bil next month in the South-East Asian nation's largest initial offering ever, two people familiar with the deal said this week.

That's double the US$2.1bil that 26 Malaysia IPOs have raised in 2010 and would lift the nation's sales above last year's all-time high.

Shares of Asian IPOs have become more expensive, rising to 28 times next year's profits from 24 times when sold, based on the 382 companies with analyst estimates.

That's more than double the valuation for companies in the S&P 500, which sell at an average of 12.3 times 2011 earnings.

- Bloomberg, 4 November 2010

UK: Pound set for pain as King under pressure

LONDON: The only major currency rivalling the dollar's decline since July is the pound, and foreign-exchange strategists say the worst is yet to come for Britain's legal tender.

Sterling has depreciated 4.87% against a basket of the nine other most-traded currencies, including last week's 1.29% drop. Strategists are the most pessimistic on the pound versus the euro since the ruling Conservative-Liberal Democrat coalition came to power in May, according to date compiled by Bloomberg.

The decline suggests investors are losing confidence in Prime Minister David Cameron's ability to restore growth while promising the deepest spending reductions in British history to shrink the biggest deficit in the Group of 20. His �81bil of cuts through 2015 would force Bank of England Governor, Mervyn King to print cash through so-called quantitative easing to prevent a new recession, overwhelming demand for sterling, according to UBS AG.

"There's definitely more weakness to come," said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA.

"The fiscal consolidation is going to hit the economy at a time when it's slowing. Under these conditions, you need to have loose monetary conditions and that weakens the exchange rate".

Redeker predicts sterling will drop to US$1.40 by June. The currency traded at US$1.5744 as of 12.37pm in Tokyo yesterday.

UBS, the second biggest currency trader after Deutsche Bank AG, recommended last week its clients sell the pound, especially against the Swiss franc, Australian dollar and Norwegian krone. Morgan Stanley strategists said it might weaken to 93 pence per euro from 89.09 pence yesterday should the recovery slow further or Bank of England policy makers signal more credit-easing measures.

This week's report on third-quarter gross domestic product "will be key in the Bank of England's decision of whether to undertake QE or not in November," London-based Morgan Stanley strategists Tim Davis and Calvin Tse wrote in report.

Britain's expansion slowed to 0.4% in the period, from 1.2% in the three months ended June 30, according to the median estimate of 35 economists surveyed by Bloomberg. GDP would increase 1.6% this year and 1.9% in 2011, another survey showed.

A depreciating pound may help UP exports at a time when countries from China to the United States and Japan are seeking to boost international sales through weaker exchange rates.

At their meetings this past weekend, G-20 finance chiefs sought to calm trade frictions by pledging to avoid weakening their currencies to boost exports and let markets increasingly set foreign exchange values.

- Bloomberg, 5 November 2010

JPMorgan to triple Asia assets

NEW YORK: JPMorgan Chase & Co plans to triple its private banking assets in Asia over the next five years, a company spokesman confirmed on Tuesday.

Douglas Wurth, JPMorgan's chief executive of international private banking, discussed those plans with Bloomberg in an interview published on Tuesday.

JPMorgan's private bank employs 400 people in Asia, and plans to increase that headcount by 40% this year and next, especially in India and China, Wurth told Bloomberg.

The company currently generates about 20% of its non-US business from Asia.

- Reuters 1 October 2010

Tax scrapped for some affordable home builders

BEIJING: China will exempt a segment of the low-income housing sector from tax in a drive to boost supply, according to a government statement.

Builders and owners of "public rent homes" will be exempt from land use tax, stamp tax, deed tax and value-added tax for the next three years, the state tax office and finance ministry said late on Tuesday.

Public rent homes are usually smaller than 60 sq m and are rented to a wide range of people on low incomes, including migrant workers and new graduates.

The measure is the latest volley in a concerted campaign to contain property inflation. House prices in major cities have soared beyond the reach of ordinary earners, ringing alarm bells in the corridors of power.

Beijing introduced an array of restrictions in April, including higher down payments and an end to mortgage discounts, to dampen speculative demand.

It also made it harder for developers to raise funds.

As the market has shown signs of the equation, on top of the new tax breaks, the government has ordered construction of all affordable housing projects to begin by the end of September.

The market is awash with speculation, fuelled by regular state media reports, that China may soon launch fresh tightening measures, including a long-awaited property tax.

- Reuters 1 October 2010

HK IPOs raising more than US & UK combined

Initial offering fees reach record low in HK

LONDON: Hong Kong bankers are charging the lowest fees on record to arrange initial public offerings (IPOs) as firms vie for deals in a market where IPOs are raising more than in the US and UK combined.

Initial sales by 37 companies in Hong Kong have paid average fees of 2.2% in 2010, the lowest level since Bloomberg began tracking the date in 1999.

While companies going public raised US$18.7bil, 64% more than American IPOs, banks earned about 43% less underwriting in the territory, the data show.

Goldman Schs Group Inc, JPMorgan Chase & Co and Deutsche Bank AG are leading Wall Street in reducing fees and winning sales where Chinese companies go public to help finance the fastest growth among the world's biggest economies.

The firms are facing more competition from Mainland banks that have boosted their share by 50% since the start of the financial crisis.

"For the big global bank there really isn't much choice," said Christopher Turner, head of capital markets at New York-based private-equity firm Warburg Pincus LLC, which oversees about US$30bil.

"In Hong Kong, the IPO business has been growing, and therefore it's ever more important for the banks to establish beachheads in these markets so they can bring deals."

Agricultural Bank of China Ltd, China Largest lender by customers, paid fees of 1.96% to Goldman Sachs of New York, Beijing-based China International Capital Corp and five other banks to lead the US$12bil Hong Kong portion of the world's biggest IPO in July 2010.

That was 0.5 percentage point lower than the fees for the US$16.1bil Hong Kong part of Beijing-based Industrial & Commercial Bank of China Ltd's initial offering in 2006.

ICBC's US$21.9bil IPO was the world's largest until Beijing-based Agricultural Bank's US$22.1bil sale.

Visa Inc of San Francisco paid JPMorgan, Goldman Sachs and six other companies' fees of 2.8% to arrange its US$19bil initial sale in March 2008, the biggest US IPO.

Agricultural Bank offering exaggerated the size of the overall fee reduction in Hong Kong this year. Excluding that sale, payouts to banks have averaged 2.96% on a market capitalisation basis.

"Mega-deals tend to pay a smaller percentage of fees but Agricultural Bank's figures show that competition escalated," said Terence Ho, a Shanghai-based partner at Ernst & Young LLP who oversees the firm's IPO research and strategy for China, Hong Kong and Taiwan.

Underwriters have received fees of US$417mil in Hong Kong to raise HK$145.6bil through initial offerings this year.

US companies have paid banks US$733mil to arrange US$11.4bil of share sales, while UK offerings produced fees of US$103mil for US$4.96bil of IPOs.

US underwriting fees rose to 6.4% this year from 5.6% in 2009.

JPMorgan, this year's biggest manager of Hong Kong IPOs, increased its share to 10.3% from 6.6%.

The New York-based firm lowered its average fee for Agricultural Bank and two other deals to 2.1% from 2.6% in 2009. Without weighting the offerings for market value, this year's average fee was 2.5%.

The bank was paid 2.5% to co-lead manage the HK$1.4bil sale from Guangzhou, China-based Chu Kong Petroleum & Natural Gas Steel Pipe Holdings Ltd in February.

That's less than half the payout for any of the 23 offerings JPMorgan helped arrange in the US this year.

Hong Kong-based spokesman Ray Bashford declined to comment.

Deutsche Bank, the second-largest Hong Kong underwriter, more than doubled its share to 10.1% after the firm cut fees to 2.1% on three deals from 2.9% on five sales.

Mark Bennewith, a spokesman in Singapore for the Frankfurt-based company, declined to comment.

Goldman Sachs has more than doubled its share of Hong Kong IPOs to 9.7% as its fees fell to less than 2% from 2.9%.

Edward Naylor, Hong Kong-based spokesman for Goldman Sachs, declined to comment.

UBS AG, which kept its Hong Kong fees virtually unchanged at 2.8% this year, has seen its market share drop to 5.1% from 18.5%.

The Zurich-based bank, which has arranged seven IPOs, the most of any underwriter, didn't participate in Agricultural Bank's sale. UBS spokesman Chris Cockerill declined to comment in Hong Kong.

Banks worldwide have charged an average fee of 3.2% this year for IPOs globally, down from 3.5% in 2009.

Deutsche Bank's average fee globally has dropped to 2.9% from 4%, while JPMorgan's declined to 3.1% from 3.9%. Fees at Goldman Sachs have fallen to 3.4% from 4.7%, while UBS raised fees to 4.2% from 2.8%.

Mainland banks are helping push down fees in Hong Kong by using connections with Chinese companies looking to go public to win deals, according to Komal Sri-Kumar, chief global strategist at TCW Group Inc in Los Angeles.

Companies from mainland China have raised a combined US$15bil in Hong Kong IPOs this year, 80% of the total.

- Bloomberg 15 September 2010

US Makes Fair Value Move - Accounting Standard-setter Overhauls Rules

The US accounting standard-setter has overhauled its current accounting rules to require US banks to value a larger proportion of their loans at fair value every quarter.

Proposed changes, which would see loans and securities valued at current market price rather than use methods that protect them from short-term price fluctuations, are set to come into force in 2012.

The move is a blow to convergence of a single set of accounting standards, as Europe is set against fair value accounting, blaming it for its role in causing the banks to collapse during the economic crisis by forcing them to mark the value of their assets at current market price when those markets were collapsing.

Under the proposed changes, commercial and retail banks such as JP Morgan Chase and Bank of America are more likely to be affected, whereas securities houses such as Goldman Sachs and Morgan Stanley would be less so, because they value assets at market price.

Chairman of the Financial Accounting Standards Board Bob Herz said, "The changes we are proposing are aimed at improving the accounting for financial instruments in a number of ways. The proposal would impact the reporting by financial institutions and all other entities that have financial instruments as the goal of greater transparency in financial statements is pursued. We encourage all interested parties to carefully review the proposal and provide us with your comments."

The 218-page exposure draft published by the FASB said the goal still remains for it to work with its international counterpart, the International Accounting Standards Board, to make improvements, but said that different imperatives faced by both have resulted in different approaches for accounting for various financial instruments, resulting in different timetables for the project.

Source: accountancymagazine.com 14 September 2010

Malaysia the 37th best country in the world, says survey

MALAYSIA: Malaysia is ranked 37th in the "Best Countries in the World" survey by Newsweek international magazine.

It is also among the top three Asian nations that are regarded as among the best in the world. Japan is at ninth place and Singapore 20th.

The first-ever survey by the magazine on best countries in the world also listed Malaysia as the eighty best in education among the upper middle-income countries.

Singapore emerged tops in the economic dynamism category. The magazine attributed it to the island nation's "manageable" size. Newsweek also noted that although the Singapore government had control over more than half of its economy through state-run sovereign wealth funds and corporations, it was extremely pro-free trade and pro-business.

Education is also tops in Singapore. It was listed as having the world's fourth best education quality.

The Other Asian countries listed in the overall best countries survey were Thailand (58th); China (59th); Philippines (63rd); Indonesia (73rd); India (78th); Vietnam (81th); Bangladesh (88th) and Pakistan (89th).

Newsweek said that overall, the top three best countries in the world are Finland, Switzerland and Sweden.

The survey was aided by an advisory board whose members comprised among others, Nobel laureate Joseph Stiglitz and Brookings-Tsinghua Centre for Public Policy director Geng Xiao.

-Nation Sunday Star 5 September 2010

HSBC clients may face US tax probe

NEW YORK: The Justice Department is conducting a criminal investigation of HSBC Holdings Plc clients who may have failed to disclose accounts in India or Singapore to the Internal Revenue Service (IRS), according to three people familiar with the matter.

One client got a letter from the Justice Department in late June that said prosecutors had "reason to believe that you had an interest in a financial account in India that was not reported to the IRS on either a tax return" or a Treasury Department report disclosing foreign accounts, according to a copy read to Bloomberg News by a lawyer for one of the clients.

"This is a global initiative by IRS and the Department of Justice," said Robert McKenzie, an attorney at Arnstein & Lehr in Chicago who said he spoke to two people who got letters.

The probes showed how the US was expanding its crackdown on offshore tax evasion beyond Switzerland and UBS AG, the largest Swiss bank, said Barbara Kaplan, a tax lawyer at Greenberg Traurig LLP in New York.

London-based HSBC is Europe's biggest lender by market value.

"It's clear that the IRS and the Department of Justice are intending to pursue other depositors outside of Switzerland.

"They've announced it before, and they are moving forward in that regard," Kaplan said.

- Bloomberg 14 July 2010

World copper shortage looms

LONDON: The world's biggest copper producers are warning of looming supply limits at the same time that growing concerns about the global economy, leave investors with the largest losses in nine years.

While London Metal Exchange futures anticipate prices no higher than US$6,519.50 a tonne through the end of 2011, or 1.2% more than for delivery now, 13 of 14 analysts surveyed by Bloomberg expect a shortage next year.

- Bloomberg 12 July 2010

ICBC planning rights issue

HONG KONG: Industrial & Commercial Bank of China (ICBC), the world's most valuable bank, will likely plan a rights issue for it's A and H shares after a similar move by the Bank of China, according to IFR, a Thomson Reuters service.

A final decision had not been made yet, but ICBC was definitely inclined towards a rights issue instead of an earlier proposed H-share placement worth US$10bil, IFR quoted bankers involved as saying yesterday.

ICBC declined to comment.

- Reuters 12 July 2010

ECB's Tumper-Gugerell: EU recovery "on-track"

SHANGHAI: Europe's recovery from a debt crisis that roiled global markets is "well on track," a member of the European Central Bank (ECB) governing council said in Shanghai on Saturday.

"We have the right policies in place to ensure the return to the levels of growth we have seen prior to the crisis," Gertrude Trumpel-Gugerell told a financial conference in the city.

"Low interest rates all along the money market yield curve" are cutting funding costs. "The economy is expanding and we see a positive growth outlook."

The central bank on June 10 raised its euro-region growth forecast for this year to 1%, from a previous forecast of about 0.8%.

The ECB has kept its benchmark interest rate at a record low of 1% since May 2009.

- Bloomberg 12 July 2010

CSR disposes of Asian businesses

MELBOURNE: Building firm CSR Ltd has agreed to sell its Asian businesses to the Rockwool Group for A$128mil, but the company's Malaysian plant is not included in the deal.

Under the deal, Rockwool will acquire 100% of CSR's insulation, panels and trading businesses across Asia.

The deal excludes CSR's autoclaved aerated concrete plant in Malaysia.

CSR's technical insulation business owns and operates three mineral wool factories in China, Malaysia and Thailand.

- Bernama 12 July 2010

China may strip CIC's stakes

BEIJING: China is considering stripping the country's US$300bil sovereign wealth fund of banking stakes to help it get around some US investment restrictions.

A Financial Times report citing unnamed sources said yesterday the proposal would mean China Investment Corp (CIC) would no longer be responsible for holding the state's majority stakes in China's largest banks.

It would end CIC's status as a bank holding company in the eyes of the US Federal Reserve and free the Chinese wealth fund of certain restrictions when making investments, the report said.

- AFP 12 July 2010

Beijing calls for fair treatment

BEIJING: China called for fair treatment of its companies yesterday after US lawmakers raised objections to a giant Chinese steelmaker's plans to invest in an American steel mill.

Fifty US Congress members last week sent a letter to Treasury Secretary Timothy Geithner, urging an investigation into the US plans of Anshan Iron and Steel Group, one of the China's biggest steelmakers.

- Reuters 12 July 2010

UK ministers told to plan 40% budget cuts

LONDON: UK government departments have been told to plan for budget cuts of as much as 40% as Chancellor of the Exchequer George Osborne seeks to narrow a record deficit, Transport Secretary Phillip Hammond said.

Hammond, speaking on BBC 1 television's Andrew Marr Show yesterday, confirmed a report in the Observer newspaper that the Treasury had ordered most ministers to draw up scenarios for spending reductions of both 25%, the figure specified by Osborne in last month's budget, and 40% over four years.

Prime Minister David Cameron's coalition government of Conservatives and Liberal Democrats is proposing spending cuts and tax increases totaling �113bil to slash a deficit of 11% of economic output.

Osborne is due to set budgets for each department in a spending review in October.

- Bloomberg, 11 July 2010

French, Spanish groups bid for railway project

JEDDAH: Saudi Arabia said two groups submitted bids for the second phase of a railway project to link the Red Sea city of Jeddah with Mecca and Medina, Islam's two holy cities, after three other consortiums declined to bid.

A Saudi-Spanish group led by the local Al-Shoula Holding Group and a partnership of France's Alstom SA and the Riyadh-based Al-Rajhi Group submitted bids on Saturday for the estimated US$12.5bil contract, the Saudi Railways Organisation said in a statement issued by the Saudi Press Agency.

Three other groups, including a partnership of Saudi Binladin Group, Deutsche Bahn AG and Siemens AG, a Chinese consortium led by China South Locomotive & Rolling Stock Corp and a group including South Korea's Hyundai Engineering & Construction Co Ltd and Samsung Engineering Co Ltd did not bid for the project, the SRO said.

- Bloomberg, 11 July 2010

China's central bank against yuan move

SHANGHAI: China's deputy central bank governor Hu XiaoLian said big moves in currencies hurt the global economy, signaling the government is unlikely to give in to pressure from the US and European Union over the strength of the yuan.

A nation's current account balance can be used as a "window" to watch if its exchange rate is at an equilibrium level, People's Bank of China deputy governor, Hu said at a financial conference in Shanghai on Saturday.

The ratio of China's current account surplus to gross domestic product had been shrinking, she said.

The level of an exchange rate was based on market demand and supply, she said.

It's good to have currencies with a certain amount of flexibility, but big fluctuations in major currencies were bad, she said.

- Bloomberg, 12 July 2010

EU rules may hurt hedge fund sector

SINGAPORE: The European draft rule to tighten hedge-fund regulations may take it "unduly difficult and onerous" for Singapore-based alternative investment managers to access investors in Europe, according to the hedge-fund industry's largest trade group.

"The latest set of directives, if left unchanged, could significantly detract from the growth of the local alternative investment management industry," said Michael Coleman, Chairman of the Singapore Chapter of the Alternative Investment Management Association.

Singapore's hedge fund industry oversees at least US34.9bil assets.

- Bloomberg 24 May 2010

Circuit breakers for all US stocks

SHANGHAI: All US stocks will probably be subject to so-called circuit breakers by the end of this year, Duncan Niederauer, Chief Executive Officer of the stock exchange operator NYSE Euronext, said yesterday.

The circuit breakers, a mechanism to halt trading in a stock for five minutes if it falls more than 10% within five minutes, would initially apply to stocks in the Standard & Poor's 500 index under a proposal by the Securities and Exchange Commission (SEC) as regulators try to avoid a repeat of the mysterious May 6 market slide that quickly spiralled out of control.

"They need to be applied to all the markets, not just some of the markets," Niederauer said, suggesting the circuit breakers also applied to exchange-traded funds, something the SEC has said might happen later.

- Reuters 23 May 2010

HK faces risk of property bubble

HONG KONG: The risk of a property bubble remained in Hong Kong amid liquidity and low interest rates, Norman Chan, Chief Executive of the Hong Kong Monetary Authority (HKMA) said yesterday.

"In the scenario of extremely low interest rates, ample funds and positive economic trends, the risk of formation of asset bubbles hasn't diminished," Chan said in a legislative session.
Home prices in Hong Kong have risen 9.3% this year, adding to 2009's 29% gain, as record-low interest rates, lagging supply growth and buying from rich mainland Chinese fuel demand.

- Bloomberg 22 May 2010

China to widen Yuan trade

SINGAPORE: China is considering allowing the Yuan to trade against the Malaysian ringgit, Russian Ruble and South Korean Won to promote its use in cross-border trade, according to an official at the China Foreign Exchange Trade System. An official at the Shanghai based interbank exchange, which is a subsidiary of the Central Bank explained that The People's Bank of China is investigating the possibility of offering new foreign exchange pairs.

UK Parties prepare for May 6 election

LONDON: British Prime Minister Gordon Brown will kick off a month-long general election campaign today, set to be a neck-and-neck race dominated by the country's recession-hit economy.

Brown visits Queen Elizabeth II to dissolve parliament and officially fire the starting gun on the campaign which will culminate in a May 6 vote, a government source said.

Campaigning has already been under way for some weeks, but the official announcement of the election date will sharpen the fight in a contest in which the opposition Conservatives are bidding to return to power after 13 years.

The centre-right party led by David Cameron had established a commanding lead over Brown's centre-left Labour Party in opinion polls only to see it melt away in recent weeks, raising the prospect of a hung parliament.

Several polls in recent days, however, indicated the Conservatives had re-established enough of a lead to give them a narrow majority in the House of Commons and make the telegenic, 43-year-old Cameron prime minister.

A survey for the Express newspaper yesterday gave the Tories a commanding 10-point lead, which would probably give them a majority in the Commons.

But in a sign of how unpredictable the vote could still be, a poll for the Guardian newspaper, the same day showed Labour closing the gap, just four points behind Cameron's party.

A key battleground in the ballot will be Britain's economy. The country has just edged out of its longest recession on record, but some economists still fear a possible "double dip" back into the red.

Labour will make economic recovery a focus, with Brown kicking off his campaign with a warning to voters that Conservative policies could return the country to recession.

- AFP

Happiness may be good for your heart, study finds

LONDON: You�ve heard it before: to avoid a heart attack don't smoke, eat right and exercise. But it also may help to be happy, a new study says.

Even if you're grumpy by nature, just try to be cheerful. Researchers at Columbia University rated the happiness levels of more than 1,700 adults in Canada with no heart problems in 1995.

After a decade, they examined the 145 people who developed a heart problem and found happier people were less likely to have had one. The study was published online yesterday in the European Heart Journal.

"If you aren't naturally a happy person, just try acting like one," said Dr. Karina Davidson of Columbia University Medical Centre, the paper's lead author. "It could help your heart."

Davidson and colleagues used a five-point scale to measure people's happiness. They then statistically adjusted to account for things like age, gender, and smoking.

For every point on the happiness scale, people were 22% less likely to have a heart problem. The study was paid for by the US National Institutes of Health and others.

Davidson said happy people were more likely to have a healthier lifestyle.

It could also be there is an unknown genetic trait that predisposes people to be happy and have less heart disease.

Other experts said happiness itself could result in a healthier heart compared to other emotions such as stress or depression.

Stress often releases hormones that can damage heart muscle.

Stress can also cause blood vessels to open too wide, allowing plaque buildups to break off and clog the arteries, according to Sweden's Kalmar University professor of health sciences Joep Perk. He is also the spokesman for the European Society of Cardiology. Perk was not linked to the study.

"I often tell my patients not to get too depressed because it's bad for your heart." Perk said. "You need time to recharge your batteries or else your heart won't be able to take it.
Depression has long been noted as a risk factor for heart problems.

- AP

Britain's Q4 economic growth disappoints

LONDON: Britain only just crept out of an 18-month recession at the end of 2009, suggesting any monetary tightening remains a long way off and raising fears about the prospects for recovery ahead of an election due by June.

The Office for National Statistics said yesterday, Gross Domestic Product (GDP) rose by 0.1% between October and December, well below analysts' forecasts for growth of 0.4% and lower than all the predictions in a Reuters poll.

For 2009 as a whole, the economy shrank by 4.8% - the worst yearly performance since records began in 1949. - Reuters

S&P warns it may cut Japan rating

TOKYO: Standard and Poor's (S&P) yesterday threatened to cut Japan's credit rating unless it produced a credible plan to rein in its soaring debt and lift growth in an economy plagues by persistent deflation.

The warning in the form of a downgrade in Japan's debt outlook coincided with the Bank of Japan's policy meeting, in which the central bank forecast that price declines would be less pronounced than earlier thought.

The ratings agency cut its outlook on Japan's long-term sovereign debt rating of AA to negative from stable, saying that the government's diminishing policy flexibility may lead to a downgrade "unless measures can be taken to stem fiscal and deflationary pressures." - Reuters

Germany raises growth forecast

BERLIN: Germany has raised its 2001 growth forecast to 1.4% from a previous estimate of 1.2%, the Economy Ministry said yesterday, boosting hopes that recovery in Europe's largest economy is gathering pace.

The government see exports rising 5.1% in 2010 and supporting the recovery in Germany, which is heavily reliant on foreign trade for economic growth and was the world's biggest exporter of goods from 2003 to 2008. - Reuters

Dubai Investments swings to profit

DUBAI: Dubai Investments PJSC, which owns stakes in more that 40 companies, said it had a profit in the fourth quarter compared with a loss in the period a year ago. Net income was 141 million dirhams, compared with a loss of 87 million dirhams last year, the company said in a stock exchange statement yesterday. - Bloomberg

Soros: Banks may be "too big to fail"

LONDON: Billionaire investor, George Soros said the largest financial institutions may be "too big to fail" even under President Barack Obama's plan to rein them in. "Some of the banks will spin off investment banks that will be too big to fail," Soros said.

Soro's comments came as bankers criticised Obama's proposal last week to limit the size of banks and prohibit them from investing in hedge funds and private-equity funds as a way to reduce risk-taking and prevent a repeat of the credit crisis. - Bloomberg

Tiger IPO Priced at Mid range

SINGAPORE: Facing a tough travel industry outlook, Singapore budget carrier, Tiger Airways priced its US$178mil IPO - Asia's first airline offering in nearly five years - in the middle of an indicative range.

Tiger's initial public offering comes as some traditional carriers are pushed to the brink of bankruptcy and state airlines are tuning to governments for aid. Tiger, 49%-owned by Singapore Airlines (SIA) and part-owned by state investor, Temasek, set the IPO price at a mid-range S$1.50 a share, valuing the offer at around S$248mil (US$178mil), said two sources close to the deal.

A Tiger Airways spokesman declined to confirm the final price. "Since this is the first airline IPO in so many years, some people might get a bit excited, although I think the pricing is too high," said one analyst at a local brokerage.

The IPO values Tiger at 12.64 times its March 2011 earnings, compared with Malaysian rival AirAsia, which currently trades at around 7.6 times its 2010 earnings. One of the sources said institutional sales were more than four times subscribed and the public offer was more than 20 times subscribed.

The airline will list its shares on the Singapore Exchange on Friday. Citigroup, Morgan Stanley and DBS are handling the IPO, according to the prospectus. Tiger said it would use the proceeds to fund aircraft purchases and set up a new operating base, as well as to pay off some existing debt.

The airline has grown rapidly since it began operations in Singapore in September 2004 and briefly turned profitable in its third year of service. It posted a S$50.8mil loss for the year to March 2009 due to costs incurred in starting up operations in Australia, where it competes against Qantas Airways Ltd's Jetstar.

Tiger has 17 Airbus A-320 aircraft in service, with orders for a further 55 A-320s for delivery by 2016. The airline is selling around 165 million shares, or about 30% of its enlarged share capital. About 94.2% of its IPO comprises new shares, while the remaining 5.8% are vendor shares held by Indigo Partners. - Reuters

SEC drops plan to limit debt buys

WASHINGTON: US securities regulators are abandoning a plan to ban money-market mutual funds from buying anything other than the most highly rated debt after companies said the requirement would hurt the commercial-paper market, three people familiar with the matter said.

The Securities and Exchange Commission (SEC) was scheduled to vote yesterday to cut the so-called tier two securities money funds can buy, instead of barring purchases as proposed in June, said the people, who declined to be identified because the agency's plans weren't public. - Bloomberg

Bursa raps Axis, 7 directors fines

MALAYSIA, Kuala Lumpur: Bursa Malaysia has publicly reprimanded Axis Corp Bhd for breaches of the listing requirements that include failure to submit the company's audited accounts and latest annual report within the stipulated timeframe.

The exchange also publicly reprimanded and imposed fines totalling RM647,200 on seven directors of Axis including the executive chairman for failure to discharge their duties.

"The finding of breach and imposition of penalties on Axis and the directors are made pursuant to paragraph 16.17 upon completion of the process and after taking into consideration all facts and circumstances of the matter including relation to the directors, the role and responsibilities, particularly pertaining to the maintenance and preparation of financial statements." Bursa said.

Financial Crackdown May Crimp Recovery

Business leaders voice concern over plans to tax and curb big banks

DAVOS: Global business leaders warned Western governments yesterday that a populist crackdown on the financial industry could crimp a fragile recovery from the worst recession since the 1930s.

The worried response to US President Barack Obama's plans to tax and curb big banks, came on the opening day of the World Economic Forum, an annual gathering of some 2,500 business leaders and policy makers in the Swiss ski resort of Davos.

Surveys produced for the annual conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets.
But the spectre of heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders' horizon.

"It would be unfortunate if regulatory reforms that will be forthcoming were based on a populist message," said Dennis Nally, global chairman of accountants PricewaterhouseCoopers (PwC).
Obama jolted markets on Jan 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and stop proprietary trading, and to make the financial sector pay for a massive taxpayer bailout.

"Unfortunately, what we are seeing is a number of actions that have taken place very much on a country specific basis," Nally told Reuters, warning of possible "unintended consequences".
"You've seen it in the US, you've seen it in Britain, you've seen it in parts of Europe. It's not surprising because there is a lot emotion around all of this and people want to see action taken," he said.

Barclays president Bob Diamond challenged Obama's effort to limit the size of big banks, telling a forum session: "I have seen no evidence ... that shrinking banks is the answer. If you step back and say too big is bad ... the impact of that on global trade, on the economy, could be very negative."

A PwC study showed business confidence bouncing back after the sharpest drop in economic activity Dennis Nally ... �It would be unfortunate if regulatory reforms that will be forthcoming were based on a populist message." - Reuters

Since World War Two, prompting more industry leaders to start hiring again.

The survey of 1,200 chief executives in 52 countries found 39% of industry bosses aimed to hire extra staff in 2010, while 25% planned more job cuts, down from nearly half who slashed jobs last year.

But recruitment will be on a modest scale and mostly in booming emerging economies such as China and India, rather than in the developed world, the report showed.

Obama's proposed curbs on Wall Street drew guarded support from European governments but officials said the European Union does not plan to follow his lead.

That could complicate efforts to build a global consensus on financial regulation in the G20 grouping of major economies.

European Central Bank president Jean-Claude Trichet played down transatlantic differences, telling the Wall Street Journal the proposed US reforms were "relevant and interesting" and shared the same aims as European measures.

"They go in the same direction of our own position, namely ensuring that the banking sector focuses on financing the real economy, which is its key role," he said. But he called for coordination to avoid creating loopholes in the integrated international financial system. - Reuters

IMF Approves RM348m Loan For Economic Recovery

USA, WASHINGTON: The International Monetary Fund has approved a no-strings, interest-free US$102mil (RM348mil) loan to Haiti to help the Western Hemisphere's poorest nation deal with the aftermath of a devastating earthquake.

The IMF said approval of this amount brings the total IMF aid being disbursed to Haiti this week to US$A14mil (RM389mil), constituting the largest amount made available so far to Haitian authorities.

Some aid and development groups have criticised the IMF for lending Haiti money instead of providing a grant.

IMF officials pointed out that Haiti, the poorest country in the Western Hemisphere, is eligible for a loan forgiveness programme for poor nations run by the IMF and its sister institution, the World Bank, and received US$1.2bil) in debt relief last June.

Dominique Strauss-Kahn, head of the IMF, said Haiti's needs are massive and pressing after the 7.0 earthquake hit the Caribbean nation on Jan 12 and killed an estimated 200,00 people. It left much of the capital of Port-au Prince in rubble and survivors camping out in the streets.

"The international community has responded fast and has already mobilised substantial resources for the relief and recovery effort," Strauss-Kahn said.

He said the fund is participating in a coordinated international effort to asses the economic impact of the earthquake and will help Haitian authorities in planning and implementing a plan for medium-term reconstruction and economic recovery. - AP

Bank Negara Leaves Rates Unchanged

MALAYSIA, PETALING JAYA: Bank Negara yesterday kept the benchmark interest rate unchanged at 2% after its first monetary policy meeting for the year.

The central bank said while monetary policy would continue to focus on economic growth, it was keeping a vigilant eye on the negative impact arising from having interest rates low for an extended period.

"Moving forward, monetary policy would remain accommodative to ensure that the economic recovery is well entrenched," Bank Negara said in a statement yesterday.

"At the same time, the monetary policy committee also recognises the need to ensure that the stance of monetary policy is appropriate to prevent the build-up of financial imbalances that could arise from interest rates being too low for a prolonged period of time," it said.

Recent economic indicators suggested that the local economy expanded "favourably" in the last quarter of 2009, Bank Negara said.

Also, positive developments in manufacturing production, financing activity, external trade and labour market conditions had "reaffirmed" the central bank's assessment that the economic recovery was gaining strength.

Bank Negara's overnight policy rate (OPR) has remained at the current level since the central bank last cut the benchmark rate in February last year, as central banks and governments worldwide acted in unison to counter the financial crisis that exploded in the West in the third quarter of 2008.

Recently, there is a growing call for governments to tighten their loose monetary policy to head off runaway prices fuelled by cheap money.

China's central bank has already taken steps towards tighter monetary policy by curbing bank lending and raising the portion of money banks need to set aside as special reserves.

Meanwhile, most economists projected that any local rate hike would only happen in the second half of the year at the earliest despite some concern about inflation as the consumer price index had turned positive in December.

"The pace of price increases for the year is projected to be gradual, reflecting the prevailing economic conditions and taking into account some adjustments in administered prices," Bank Negara said.

The central bank said in the absence of further price revisions and external influences, "a positive but modest inflation rate" was expected in 2010.

News Corp Keen To Assist MGM

NEW YORK: News Corp has expressed interest in providing Metro-Goldwyn-Mayer Inc (MGM) with cash and assistance in restructuring debt to keep the studio independent, according to a person with knowledge of the situation.

The non-binding offer from News Corp, owner of the Twentieth Century Fox film studio, was outlined in a letter last week, said the person, who declined to be identified because the talks are private. The person wouldn't disclose other terms.

MGM, maker of the "James Bond" movies, is evaluating preliminary bids from possible buyers as it struggles with US$3.7bil in debt.
News Corp's Fax studio distributes DVDs for Los Angeles-based MGM. Chris Petrikin, a Fox spokesman, declined to comment. - Bloomberg

Summer Trial for SEC / BOA Case

NEW YORK: The second of two US Securities and Exchange Commission (SEC) lawsuits against Bank of America Corp (BoA) over the Merrill Lynch & Co takeover may be ready for trial on the first lawsuit set to begin on March 1.

US District Judge Jed Rakoff, who presides in both cases, on Friday set a final pre-trial conference in the second case for June 29. No trial date has been set. The SEC in the second case accused the largest US bank of failing to disclose billions of dollars of losses at Merrill before shareholders voted on the merger in December 2008. - Reuters

FDIC Clocks 15 Bank Failures

USA, LOS ANGELES: Six more US banks were seized on Friday as regulators continue to close the doors of banks struggling to cope with fallout from the financial crisis.

The Federal Deposit Insurance Corp (FDIC) said First Regional Bank in Los Angeles, Florida Community Bank, First National Bank of Georgia, American Marine Bank in Washington, Marshall Bank on Minnesota and Community Bank and Trust in Georgia had failed - pushing the tally to 15 banks that have failed this year.

The FDIC expects 2010 to be a peak for bank failures as a result of the financial crisis. Last year, 140 banks failed, compared to 25 in 2008 and three in 2007. - Reuters