The following are the day's top business stories:
1. Goldman Sachs Investment in Facebook May Draw SEC Scrutiny on Disclosure 2. Yuan Appreciation to Slow in 2011, Top Forecasters Predict: China Credit 3. Japanese Stocks Gain on Improving U.S. Outlook; Canon, Honda Motor Advance 4. Currency Carry Trade Losses Exceeding Lehman Crisis Bolster Dollar Outlook 5. Pimco Favoring Convertibles as Loomis Takes `Equity Risk': Credit Markets 6. Australia Manufacturing Shrinks for Fourth Month on Higher Borrowing Costs 7. U.S. Manufacturing Grows at Fastest Pace in Seven Months, Leading Recovery 8. Banks Flush With Deposits Parking Cash in Government Bonds: Japan Credit 9. Macau December Casino Revenue Rises 66% to $2.36 Billion on China Tourism 10 Afghanistan Considers Standalone Banks to Lure $3 Billion: Islamic Finance 11.Hedge Funds Increase Bullish Crude Bets to Four-Year High: Energy Markets 12.CIC Backs Manhattan Tower as China Steps Up U.S. Real Estate Investments
1. Goldman Sachs Investment in Facebook May Draw SEC Scrutiny on Disclosure
Goldman Sachs Group Inc.´s plan to offer clients up to $1.5 billion in Facebook Inc. equity may invite U.S. regulators to take a closer look at whether the owner of the world´s most popular social-networking site is circumventing disclosure rules, securities lawyers said. The Securities and Exchange Commission, whose rules require any company with more than 499 investors to disclose financial information, is already scrutinizing the market for trading shares of closely held companies including Facebook, according to a person familiar with the inquiry, who declined to be identified because the matter isn´t public. Goldman Sachs invested $450 million in Facebook and is planning to create a special purpose vehicle for its clients to make additional investments worth as much as $1.5 billion, according to two people familiar with the matter who spoke on condition of anonymity because the deal is private. Some private companies avoid crossing the disclosure threshold when investors´ funds are channeled through a single entity, such as a private equity firm or hedge fund. "The real question is, what are the details of this special purpose vehicle?" said James Angel, a finance professor at Georgetown University´s business school in Washington. If the investment is designed to circumvent the rule, "the SEC should be looking very closely at it."
2. Yuan Appreciation to Slow in 2011, Top Forecasters Predict: China Credit
The yuan´s appreciation may slow this year after the currency strengthened beyond 6.6 per dollar for the first time in 17 years, as China seeks to stem inflows that may fuel inflation, the most-accurate forecasters for 2010 said. The yuan will advance 4.6 percent to 6.3 per dollar, after climbing 3.6 percent in just over six months, said Yen Ping Ho, the head of Asian foreign-exchange strategy for JPMorgan Chase & Co. in Singapore, whose 6.58 forecast was closest to the Dec. 31 close among 21 analysts surveyed by Bloomberg a year ago. ING Groep NV and HSBC Holdings Plc, whose predictions were the next most accurate, say the yuan will advance 3.8 percent to 6.35. "The authorities have tended to favor gradual appreciation," Ho said. "Some of the appreciation may be front-loaded in the first half to anchor inflation. But they won´t move too fast as they are worried about the impact on the economy. Rapid appreciation may also promote more speculative inflows which they don´t welcome." Chinese executives including officials at China Merchants Bank Co. and Jiangsu Shagang Group Co. are reducing support for a stronger yuan on concern economic growth may slow as the central bank raises interest rates to cool the fastest inflation since 2008. The yuan is still likely to outperform currencies from the other so-called BRIC nations as the median estimate of economists surveyed by Bloomberg forecast a 5.1 percent advance this year compared with predictions of a 2.4 percent drop for Brazil´s real, 0.7 percent increase for Russia´s ruble and 4.1 percent rise for India´s rupee.
3. Japanese Stocks Gain on Improving U.S. Outlook; Canon, Honda Motor Advance
Japanese stocks gained, sending the Topix to a seven-month high, as expansion in U.S. manufacturing boosted confidence in a global economy recovery. Canon Inc., a Japanese camera maker that gets about 80 percent of its sales abroad, gained 1 percent. Honda Motor Co., Japan´s second-largest automaker, advanced 1.2 percent. Mitsui & Co., a trading house that counts commodities as its biggest source of profit, rose 1.1 percent as oil and copper prices rose. "The soundness of the economic figures may ease investors´ recent worries," said Kazuhiro Takahashi, a general manager at Tokyo-based Daiwa Securities Capital Markets Co. "Short-term funds are flowing into commodities and stocks." The Nikkei 225 Stock Average rose 1.1 percent to 10,337.81 as of 9:17 a.m. in Tokyo. The Topix advanced 1 percent to 908.12, with almost 12 times as many shares rising as falling. The Topix is set for the highest close since May 19, 2010.
4. Currency Carry Trade Losses Exceeding Lehman Crisis Bolster Dollar Outlook
Currency traders that seek profits by borrowing in nations with low interest rates to fund purchases in countries with higher yields are losing more money than at any time in at least a decade. The strategy lost 2.5 percent in 2010 as the dollar -- a favorite for financing the trades because of record low U.S. rates -- appreciated, according to an index compiled by UBS AG, the world´s second-largest foreign-exchange trader. That´s more than the 0.98 percent drop in 2008 when the collapse of Lehman Brothers Holdings Inc. caused credit markets to freeze and the worst performance for so-called carry trades since at least 1999 when UBS began releasing yearly figures. Falling demand for carry trades may help the greenback extend a rally that drove IntercontinentalExchange Inc.´s U.S. Dollar Index up 4.5 percent from its low this year on Nov. 4. Gains in manufacturing and retail sales are leading investors to buy the dollar, rather than sell it to fund other investments. "The U.S. will look reasonably better compared to other economies," said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB, a unit of France´s second-biggest bank. "Bond yields will move higher, and that will certainly reduce substantially the attraction of the dollar as a funding currency."
5. Pimco Favoring Convertibles as Loomis Takes `Equity Risk': Credit Markets
Pacific Investment Management Co. and Loomis Sayles & Co. are betting that convertible debt will rally further this year as stocks rise and Treasury bonds fall. Bonds that may be exchanged for shares returned 16.8 percent last year, beating Treasuries, benchmark U.S. stock indexes, high-yield and investment-grade corporate debentures and municipal debt, Bank of America Merrill Lynch index data show. Fixed-income investors are turning to convertibles amid signs the U.S. economy is improving. While the Standard & Poor´s 500 Index gained 10.76 percent in the fourth quarter, including reinvested dividends, Treasuries lost 2.7 percent. The Pimco Total Return Fund, the world´s largest mutual fund, is allowing investments in equity-linked securities for the first time since 2003. The $19.4 billion Loomis Sayles Bond Fund, which beat 98 percent of fixed-income funds in the past five years, also is investing in convertibles. "You´re starting to see for the first time interest rates tick up a little bit, and people are realizing what happens in their fixed-income portfolios when that takes place," said Justin Kass, a money manager who helps oversee $2.8 billion of convertibles at Allianz Global Investors Capital in San Diego. "We´ve been a big beneficiary of shifts in the past three months in terms of flows in our growth funds."
6. Australia Manufacturing Shrinks for Fourth Month on Higher Borrowing Costs
Australian manufacturing contracted in December for a fourth month as higher borrowing costs curbed consumer spending and the nation´s currency surged to a record, eroding export earnings. The performance of manufacturing index fell to 46.3 from 47.6 in November, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A number below 50 indicates contraction. The nation´s factories are lagging behind the mining industry, which is expanding to meet rising Chinese demand for raw materials and pushing the job market close to a level the government views as full employment. The Australian currency rose 14 percent against the U.S. dollar last year, driving down the cost of imports and eroding exporters´ competitiveness. "The continuation of flat conditions in the sector reflects accumulating structural pressures mounting on the industry along with other trade-exposed sectors in the wake of the mining boom," Heather Ridout, chief executive officer of the Australian Industry Group, said in a statement. "These forces are pushing up the level of the dollar and expectations about the directions of interest rates and inflation."
7. U.S. Manufacturing Grows at Fastest Pace in Seven Months, Leading Recovery
Manufacturing in the U.S. expanded in December at the fastest pace in seven months, reinforcing signs the expansion is gaining momentum. The Institute for Supply Management´s index climbed to 57 last month from 56.6 in November, the Tempe, Arizona-based group said today. A reading greater than 50 points to expansion, and the figure matched the median forecast of economists surveyed by Bloomberg News. Stocks rallied, sending benchmark indexes up the most in a month, on speculation U.S. growth will keep strengthening in early 2011, raising prospects for more hiring. Increased spending by American consumers and business investment is helping drive production gains at factories that make up about 11 percent of the world´s largest economy. "The factory sector is growing at a brisk pace, and it´s getting fueled by both U.S. demand and growth in exports," said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, who correctly forecast the ISM figure. "The economic recovery will get help from manufacturing."
8. Banks Flush With Deposits Parking Cash in Government Bonds: Japan Credit
Japanese Prime Minister Naoto Kan´s plan to plug a budget gap with record debt sales this year will get some help from banks needing a place to park deposits that are outstripping loans by an all-time high. Customer deposits at banks exceeded outstanding lending by 151 trillion yen ($1.8 trillion) at the end of November, up 37 percent from two years ago and equivalent to a third of the economy, according to Bank of Japan data. The Ministry of Finance plans to sell 144.9 trillion yen of government bonds in the year starting April 1, 600 billion yen more than the initial plan for fiscal 2010. "As banks can´t reject deposits, you may expect banks to keep using extra money to buy government bonds," said Akio Kato, Tokyo-based team leader for Japanese debt at Kokusai Asset Management Co., which runs the $35 billion Global Sovereign Open fund, Asia´s biggest. "Companies aren´t taking out loans and individuals are shunning debt, so it´s the government that ends up borrowing. Otherwise, economic growth may turn negative." Banks in developed nations increased government bond holdings since credit markets froze in 2008 while companies have resisted taking on debt. The Bank of England said this month that lenders have generated "substantial" interest income by borrowing at low short-term rates and buying longer-term bonds. As of December, U.S. commercial banks were on pace to buy the most Treasury and agency debt in any year since the Federal Reserve began tracking the data in 1950.
9. Macau December Casino Revenue Rises 66% to $2.36 Billion on China Tourism
Casino revenue in Macau, the world´s largest casino hub, surged 66 percent to 18.9 billion patacas ($2.36 billion) in December as an increasing number of Chinese gamblers visited the city. Sales for casinos in Macau, the only place in China where they´re legal, surged 58 percent to 188.3 billion patacas last year, according to data from Macau´s Gaming Inspection and Coordination Bureau. China, which contributes more than half the number of tourists to Macau, may grow 10 percent in 2010, according to the median forecast of 18 economists surveyed by Bloomberg. Macau´s visitor arrivals rose 15 percent to 22.7 million in the first eleven months, with more than 80 percent coming from mainland China and Hong Kong, the city´s tourism agency said. Tourists from mainland China increased 20.5 percent in the first 11 months, according to the agency´s data. "The key driver was the higher average spend by an increasing number of mainland tourists," Aaron Fischer, a Hong Kong-based analyst for CLSA Ltd., said today. "What surprised us was how strong the growth remained in the second part of December."
10.Afghanistan Considers Standalone Banks to Lure $3 Billion: Islamic Finance
Afghanistan plans to let financial institutions expand services that comply with religious law and set up standalone Islamic banks to attract investment and an estimated $3 billion its residents haven´t entrusted to banks. The country´s central bank, Da Afghanistan Bank, is drafting legislation to enable non-Islamic banks to convert into full-fledged Shariah-compliant lenders, Muhammad Qaseem Rahimi, director general of the Financial Supervision Department, said in a telephone interview Dec. 29. Seven of the nation´s 17 financial institutions provide limited Islamic services such as loans and savings accounts, he said. The law will be submitted to parliament for approval in September. "There is a great potential to attract around $3 billion within four years," Khan Afzal Hadawal, chief executive officer of Bank-e-Millie Afghan, the nation´s oldest lender, said in a telephone interview from Kabul Dec. 28. "You will be surprised if I tell you that some people keep cash in their pillows." Afghanistan, where 99 percent of its 29 million people are Muslims, is vying to expand Islamic financial services and lure international investors to help reduce the nation´s reliance on overseas aid for reconstruction after more than three decades of war. Islamic banking will help attract "idle" cash from Afghans, who refuse to use non-Shariah compliant institutions, the central bank´s Rahimi said.
11.Hedge Funds Increase Bullish Crude Bets to Four-Year High: Energy Markets
Hedge funds raised bullish bets on crude oil to the highest level in more than four years on speculation that futures will climb as the U.S. recovers from the deepest recession since the 1930s. The funds and other large speculators increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission´s weekly Commitments of Traders report. It was the top total in records going back to June 2006. The wagers gained on signs that demand will advance as the U.S. economy improves. Analysts have forecast that prices may top $100 a barrel for the first time since the beginning of the financial crisis in September 2008. Global oil use will increase 1.7 percent to a record 87.8 million barrels a day this year, according to the U.S. Energy Department. "There´s this feeling that the economy is going to get stronger, that the economic recovery is taking root, and that we´re going to see things get better," said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. "All of these are working together to push the price higher."
12.CIC Backs Manhattan Tower as China Steps Up U.S. Real Estate Investments
China Investment Corp. helped refinance a Manhattan office tower co-owned by Carlyle Group last year, another sign that the $300 billion sovereign wealth fund is stepping up its U.S. real estate investments. The fund, known as CIC, joined forces with AREA Real Estate Finance Corp. of New York to buy an unspecified preferred equity stake in 650 Madison Ave., the 27-story building that is headquarters to Polo Ralph Lauren Corp., said Bradford Wildauer, AREA´s president. CIC also owns 35 percent of Industrial & Commercial Bank of China Ltd., one of two lenders that provided Carlyle with a new first mortgage on the property in June. "CIC is very bullish on investing in real estate in the U.S.," as are major Chinese banks, Jeffrey Lenobel, chairman of the real estate group at the New York law firm Schulte Roth & Zabel LLP, said in a telephone interview. "There is every reason to think you will see them together more often." The U.S. commercial real estate industry, which had $3.2 trillion in mortgage debt outstanding as of Sept. 30, will need to raise almost $1 trillion in additional equity, New York-based brokerage Keefe, Bruyette & Woods said Dec. 14. Foreign purchases, including a sevenfold jump from China, may help close the gap. Acquisitions of U.S. commercial property by buyers from the 15 largest outside countries rose to about $6.7 billion last year from $3.8 billion in 2009, according to Real Capital Analytics Inc., a research firm with offices in New York.
-0- Jan/04/2011 00:35 GMT