Top Stories: Business and Finance
The following are the day's top business stories:
1. AIG Agrees to Repay $21 Billion Fed Credit Line in Deal With U.S. Treasury 2. Treasuries Drop on Tax Cuts as AIG Pushes U.S. Stocks Higher; Kiwi Weakens 3. Manufacturing Jump to Boost Prospects for January Rate Rise: India Credit 4. Australian Employers Added More-Than-Estimated 54,600 Workers in November 5. Rio to Manage Oyu Tolgoi Gold, Copper Project in $3.7 Billion Ivanhoe Deal 6. India Inflation Above `Tolerance Level,' Subbarao Says Before Rate Meeting 7. China's Youku.com Surges 161% in Biggest Advance for U.S. IPO Since 2005 8. Hong Kong Securities Regulator CEO Wheatley Leaves After Six Years in Job 9. Hideaways Club to Triple Villas in Four Years on Asia Luxury-Travel Demand 10.Nikkei 225 `Golden Cross' Signals Rally to April High: Technical Analysis 11.Apple Displaces Samsung on Its Home Turf With IPhone`s `Big Bang' in Korea 12.China Hit With Tariffs From U.S. After Tianjin Pipe Gets Subsidized Loans
1. AIG Agrees to Repay $21 Billion Fed Credit Line in Deal With U.S. Treasury
American International Group Inc. struck a deal to repay a Federal Reserve credit line as the insurer seeks independence from the government. AIG will use proceeds from the sales of two non-U.S. life insurance units to repay the line, on which it owed about $21 billion as of last week, the New York-based company said today in a filing. The deal was struck with regulators including the U.S. Treasury Department, which holds a $49 billion preferred stake in the company. "It represents a great step forward for AIG and for the taxpayers to effectively narrow the number of counterparties from two to one," said Clark Troy, senior analyst at Aite Group in Chapel Hill, North Carolina. "We´ve had a number of steps in a row in AIG´s recovery process go off without a hitch." The Treasury Department plans to convert its investment into about 1.66 billion shares of common stock, or about 92 percent of the total, by March 15. The stake will then be sold to private investors.
2. Treasuries Drop on Tax Cuts as AIG Pushes U.S. Stocks Higher; Kiwi Weakens
Treasuries slid, sending the 10-year yield to a six-month high, while the Standard & Poor´s 500 Index closed at the highest level since 2008 amid speculation the potential extension of U.S. tax cuts will spur growth. Copper rose to a record on signs the global recovery will stoke demand. Treasury 10-year yields climbed 15 basis points to 3.27 percent after jumping 21 points yesterday, the most in 18 months. The Dollar Index added 0.2 percent for a third straight increase. The Standard & Poor´s 500 Index rose 0.4 percent, extending gains after American International Group Inc. struck a deal to repay its Federal Reserve credit line. Oil slid from a 26-month high. After the U.S. close, S&P 500 futures rose 0.3 percent at 6:45 p.m. in New York and New Zealand´s dollar weakened. Global bond markets extended a three-month decline after President Barack Obama agreed to extend Bush-era tax cuts, spurring speculation the U.S. will have to fund a larger deficit. The compromise may add as much as half a percentage point to economic growth next year, according to JPMorgan Chase & Co. China said it will post consumer-price data on Dec. 11, two days earlier than planned, fanning speculation interest rates may be increased. "The tax-cut extension is a positive for the economy," said Peter Jankovskis, who helps manage $2.2 billion as co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois. "Investors will be focused on Obama´s battle for his own party to push through that compromise," he said. "There´s concern about China raising rates further. However, the fact that has been advertised for months got investors used to that idea."
3. Manufacturing Jump to Boost Prospects for January Rate Rise: India Credit
India´s industrial production is likely to expand at the fastest pace in three months, prompting JPMorgan Chase & Co. to predict the central bank may resume raising interest rates as early as next month to curb inflation. Factory, utilities and mines output probably rose 8.4 percent in October from a year earlier after a 4.4 percent increase in September, according to the median estimate of 22 economists in a Bloomberg survey before a statistics office report tomorrow. This week Finance Minister Pranab Mukherjee raised the government´s economic growth forecast for the current fiscal year to 9.1 percent, the most in three years. India´s economy may expand more than China´s in the next 10 years if the world´s second-most populous nation lifts curbs on foreign investment and boosts spending on roads and bridges, New York University Professor Nouriel Roubini, who predicted the global financial crisis, said last week. The rupee has advanced 1.7 percent this month, the best performance among Asia´s 10- most traded currencies, as the difference in yields between Indian debt due in a decade and 10-year Treasuries widened to 492 basis points, or 4.92 percentage point, from 374 on Jan. 1. "Indian government bonds continue to remain attractive due to interest-rate differentials," Sajjid Chinoy, a Mumbai-based economist with JPMorgan, said yesterday. "The rate pause is temporary and the RBI will start raising rates as early as the first quarter if inflation continues to remain sticky and above its comfort zone."
4. Rio to Manage Oyu Tolgoi Gold, Copper Project in $3.7 Billion Ivanhoe Deal
Rio Tinto Group will take over management of the Mongolian Oyu Tolgoi project, the world´s biggest untapped copper and gold deposit, after agreeing to invest as much as $3.7 billion in partner Ivanhoe Mines Ltd. Rio agreed to lend Ivanhoe $1.8 billion and will exercise share warrants, participate in Ivanhoe´s planned $1.2 billion rights offer and buy outstanding shares, the London-based said in a statement. The deal will allow Rio to raise its stake in Ivanhoe to 49 percent from 35 percent, the Vancouver-based mine operator said separately. The two companies, embroiled in a dispute since Ivanhoe adopted a shareholder rights plan in April, yesterday said they would suspend their arbitration proceedings for six months. Rio and Ivanhoe, founded by mining billionaire Robert Friedland, are jointly building the $6 billion Oyu Tolgoi mine. Ivanhoe yesterday fell C$4.29, or 15 percent, to C$25.28, at 4 p.m. in Toronto Stock Exchange trading, the most since October 2008. Rio declined 0.3 percent to A$87.29 at 10:09 a.m. in Sydney. Ivanhoe owns a 66 percent stake in the mine, with the remaining interest held by Mongolia.
5. India Inflation Above `Tolerance Level,' Subbarao Says Before Rate Meeting
India´s inflation remains above "tolerance level," central bank Governor Duvvuri Subbarao said ahead of the monetary policy announcement next week. "Inflation is coming down but is still above the RBI´s tolerance level," Subbarao told reporters in the eastern Indian city of Kolkata yesterday. India´s benchmark wholesale-price inflation cooled to a nine-month low of 8.58 percent in October. The Reserve Bank of India aims to slow inflation to between 4 percent and 4.5 percent. India´s central bank said Nov. 2 that it probably won´t raise interest rates until January, giving itself time to see the impact of its six interest-rate increases this year. A cash crunch at banks after companies including Coal India Ltd. raised funds from share sales may also prompt Subbarao to keep borrowing costs unchanged for now, said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai. "The message is that RBI continues to remain vigilant about inflation," Rao said. "The RBI will hold rates in its Dec. 16 meeting as it waits to see the impact of its previous rate increases on inflation."
6. China's Youku.com Surges 161% in Biggest Advance for U.S. IPO Since 2005
Youku.com Inc. surged in the biggest gain for a U.S. initial public offering in five years and E- Commerce China Dangdang Inc. almost doubled in its debut, the latest sign of booming demand for Chinese Internet companies. Youku.com, China´s largest online video company, soared 161 percent to $33.44 today, after completing a $203 million IPO. The first-day advance was the biggest since Beijing-based Baidu Inc., owner of China´s most-used Internet search engine, more than quadrupled after its offering in August 2005. China Dangdang, the country´s biggest book retailer, gained 87 percent after its $272 million initial sale. The offerings were the first of five mainland Chinese IPOs scheduled in the U.S. this week. The four previous Internet companies from China that completed sales this year surged an average of 57 percent in their first day of trading, Bloomberg data show. China, home to more than 400 million Internet users, may expand four times as fast as the U.S. next year, according to the International Monetary Fund. Youku.com and China Dangdang are "two companies that excite investors´ imagination," said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. The IPOs represent an "intersection of China and the Internet, and so everyone´s jumping on board for that theme," he said.
7. Hong Kong Securities Regulator CEO Wheatley Leaves After Six Years in Job
Hong Kong´s Securities and Futures Commission is seeking a new chief executive officer as Martin Wheatley ends a six-year tenure marked by a crackdown on market misconduct and the global financial crisis. Wheatley, 51, who joined the regulator in 2005 and became CEO the following year, will leave in June to return to the U.K., he told a news conference in Hong Kong yesterday. His departure is a "personal decision," Wheatley said. Under Wheatley, the SFC secured Hong Kong´s first jail sentence for insider trading, won a court battle against billionaire Richard Li´s PCCW Ltd., and strengthened investor protections amid controversy over the mis-selling of notes linked to bankrupt Lehman Brothers Holdings Inc. "Next time they should cast a global net and find someone who has broader knowledge of financial services" said David Webb, a shareholder activist and former non-executive director of Hong Kong´s stock exchange. "Perhaps one of his weaknesses is that he was learning as he went along."
8. Hideaways Club to Triple Villas in Four Years on Asia Luxury-Travel Demand
Hideaways Club, a luxury property investment fund, plans to more than triple the number of its villas worldwide to 100 within four years, helped by higher real estate prices and Asian demand for luxury travel. The company plans to build 20 in Asia within the period, including in Cambodia, Japan, Sri Lanka and the Indonesian island of Bali, Chairman Michael Balfour said in an interview in Hong Kong. Hideaways, which has 30 villas around the world, also will expand next year into China, an "incredibly large" market, he said. Hideaways targets wealthy people and senior executives, whose investment grants them equity ownership in the fund and six weeks´ stay in the villas each year. The fund, which projects annual share returns of about 6.5 percent, expects Asia to account for 30 percent of membership in three years, double the level in 2010, Balfour said. "Asia property investment is rocketing," Balfour said Dec. 1. The executive co-founded Gibraltar-registered Hideaways three years ago and co-founded the Fitness First health-club chain almost two decades ago.
9. Nikkei 225 `Golden Cross' Signals Rally to April High: Technical Analysis
Japan´s Nikkei 225 Stock Average is poised to form a so-called golden cross, indicating the gauge may climb 11 percent back to this year´s April high within the next quarter, according to Nomura Holdings Inc. Nikkei´s 25-day moving average is less than 10 yen short of surpassing the 200-day moving average to form a golden cross, which is considered by chart watchers to be a bullish signal. The event last occurred in June 2009. The Nikkei´s high this year was on April 5, when it closed at 11,339.30 and it may rise back to that level in quarter ending March, said Shoichiro Yamauchi, a technical analyst at Nomura. "A cross would signal the gauge is headed for its April- high as a short-term target," said Nomura´s Yamauchi. "The 200-day moving average has been moving sideways, and for the shorter measure to move up and cross over, it indicates a stronger bullish trend than if the cross-over was caused by a decline in the longer measure." The last golden cross was formed on June 4 last year, when the 200-day moving average crossed below the 25-day measure as it continued a decline that started in 2007. The Nikkei then surged 17 percent to its 2010 April high. It has since tumbled 9.8 percent as the 25-moving average fell through the longer measure on May 31.
10.Apple Displaces Samsung on Its Home Turf With IPhone`s `Big Bang' in Korea
For more than a decade, Kim Jung Yeon only bought phones from Samsung Electronics Co. and LG Electronics Inc., passing on best sellers made by non-Korean companies such as Motorola Inc.´s Razr. Her loyalty ended with Apple Inc.´s iPhone. "The iPhone has a cool design and I love the feel and grip of the phone," said the 37-year-old Web designer in Seoul, who bought the device last year, and enjoys using applications about food recipes. "I don´t see any reason why I should return to LG or Samsung phones again if I buy another smartphone." Samsung and LG, the world´s two-largest handset makers after Nokia Oyj, can no longer count on home-field advantage as they play catch up in the fastest-growing segment of the $163 billion global industry. A year after Apple´s phone debuted in Korea, LG is reeling from record phone losses while Samsung this week unveiled the Nexus S phone equipped with Google Inc.´s latest Android operating system to win back customers. "Korean companies are going to face a tough situation overseas going forward, given how much share they are losing at home," said Han Eui Lim, a consultant at ROA Group Inc. in Seoul. "Especially in the case of LG, it´s very concerning."
11.China Hit With Tariffs From U.S. After Tianjin Pipe Gets Subsidized Loans
Tianjin Pipe Corp.´s 850-acre campus is unlike any other steel factory in the world. Ostriches, spotted deer and peacocks roam the grounds amid willow trees, bamboo bridges and Chinese pavilions. The plant has its own light-rail stop and hotel. Another feature -- the presence inside the fence of large branch offices of China´s three biggest state-owned banks -- symbolizes the government financial support that puts Tianjin Pipe at the center of a growing trade dispute, Bloomberg Markets magazine reports in its January issue. The U.S. International Trade Commission in October upheld tariffs of 63 percent and higher on steel products from Tianjin and other producers, finding that U.S. steelmakers are harmed by subsidies the Chinese companies receive and by unfair pricing. "While we say, `Let the markets work,´ China is building up these national champions," says Alan Price, a Washington lawyer who has represented U.S.-based steelmakers in trade cases.
-0- Dec/09/2010 00:35 GMT