The following are the day's top business stories:
1. Berkshire Divests BofA, Nike Stakes as Buffett Takes Control of Portfolio 2. Mizuho May Seek to Leverage BlackRock Stake to Buy Asset Managers in Asia 3. World Bank Loves Kangaroo Bonds on Currency Swap Benefit: Australia Credit 4. Yen Trades Near One-Week High Against Euro Before China Inflation Report 5. Australia Blocked China Rare-Earth Takeover on Concern of Threat to Supply 6. Shipping Glut Punishes Gesco Bonds as Freight Revenue Drops: India Credit 7. EU to Double Rescue Fund in 2013, Takes No Additional Measures on Portugal 8. Ambani's Flagship Reliance Communications Posts Profit Drop, Soaring Debt 9. Australian Central Bank Says Consumer Restraint Is Easing Price Pressures 10.Exports to Lift Japan Economy from Consumer-Led Contraction: Chart of Day 11 London Banks Fold Their Union Jack as Brussels Seizes Financial Regulation 12.Dougan Lowers Return-on-Equity Target as Goldman's Blankfein Clings to 20%
1. Berkshire Divests BofA, Nike Stakes as Buffett Takes Control of Portfolio
Berkshire Hathaway Inc. divested its stake in Bank of America Corp., the largest U.S. lender by assets, as Chairman Warren Buffett took control of the portfolio previously run by his backup stock picker, Lou Simpson. Buffett´s firm had no shares in the bank at the end of 2010, compared with 5 million shares three months earlier, Omaha, Nebraska- based Berkshire said today in a regulatory filing that lists the company´s U.S. stockholdings. Berkshire also eliminated its stakes in Nike Inc., Comcast Corp., Nalco Holding Co., Fiserv Inc., Lowe´s Cos. and Becton, Dickinson & Co. Buffett, 80, is reshaping Berkshire´s stock portfolio amid changes in the company´s investment managers. Simpson, once identified by Buffett as his emergency stand in, retired late last year. Berkshire, the biggest shareholder of Coca-Cola Co. and Wells Fargo & Co., hired former hedge fund manager Todd Combs to help Buffett with equity investments. "Any position that Buffett was uncomfortable holding on his own will have been sold in the fourth quarter" as Simpson left, said David Kass, a professor at the University of Maryland´s Robert H. Smith School of Business.
2. Mizuho May Seek to Leverage BlackRock Stake to Buy Asset Managers in Asia
Mizuho Financial Group Inc., Japan´s third-largest bank by market value, may seek to buy investment advisory firms in Asia with BlackRock Inc. after purchasing a stake in the world´s biggest asset manager last year. Mizuho is studying ways to deepen ties with New York-based BlackRock to aid a strategy of investing Japanese pension money in faster-growing Asian economies, Yasuhiro Sato, president of Mizuho Corporate Bank Ltd., said in an interview. The Tokyo-based bank aims to leverage the 2 percent stake in BlackRock it bought for $500 million in November to compete with larger rival Sumitomo Mitsui Financial Group Inc., which tied up with Barclays Plc last year in wealth management. The number of millionaires in the Asia-Pacific region reached 3 million in 2009, matching those in Europe for the first time, according to data from Capgemini SA and Bank of America Corp.´s Merrill Lynch & Co. unit. "The stake in BlackRock alone wouldn´t be enough to manage a substantial amount of money in Asia," Sato said on Feb. 8. "Acquisitions of management firms in the region will be the next step."
3. World Bank Loves Kangaroo Bonds on Currency Swap Benefit: Australia Credit
Sales of bonds in Australia by foreign issuers are off to a record start in 2011 as banks snap up securities to meet new international capital rules. The World Bank´s International Bank for Reconstruction and Development, the European Investment Bank and Germany´s Landwirtschaftliche Rentenbank led A$10 billion ($10 billion) in sales of kangaroo bonds, Australian dollar-denominated notes issued by non-domestic borrowers, according to data compiled by Bloomberg. That´s up from the previous record of A$8.5 billion in the same period last year. Australia is luring borrowers as the currency trades within 3 percent of the strongest level on record against the U.S. dollar, supported by the highest interest rates in the developed world and accelerating economic growth. While benchmark rates at 4.75 percent compare with 1 percent in the euro zone and as little as zero in the U.S., the swaps market is making it cheaper for some issuers to sell debt in Australia as at home. "The higher interest-rate levels in Australia compared to other developed currency markets do play a role in terms of the attractiveness of the product with international investors," Andrea Dore, the lead financial officer for capital markets at the World Bank, said in a telephone interview from Washington. Current rates for swapping the proceeds, known as the basis swap, offer "competitive funding costs compared to other markets," she said.
4. Yen Trades Near One-Week High Against Euro Before China Inflation Report
The yen traded near a one-week high against the euro before a report that economists said will show China´s consumer-price inflation accelerated last month, fueling concern the central bank will take more measures to cool growth. The euro was close to the lowest in three weeks versus the greenback on speculation European finance ministers meeting for a second day today will fail to agree on measures to shield Portugal from the region´s debt crisis. Australia´s dollar traded about 0.2 percent below this year´s high versus New Zealand´s before the larger South Pacific nation´s central bank releases minutes of this month´s policy meeting. "China´s strong CPI data may suggest the pace of tightening is too slow," said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. "The yen is likely to be bought should stocks decline following the data, cooling risk sentiment in the markets." The yen traded at 112.37 per euro as of 8:31 a.m. in Tokyo from 112.40 in New York yesterday, when it rose to 112.09, the strongest since Feb. 9. Japan´s currency was at 83.33 per dollar from 83.32. The euro bought $1.3486 from $1.3489 yesterday, when it dropped to $1.3428, the weakest since Jan. 20.
5. Australia Blocked China Rare-Earth Takeover on Concern of Threat to Supply
China´s bid to gain control of the world´s richest rare earth deposit in 2009 was blocked by Australia´s Foreign Investment Review Board on concern it would threaten supply to non-Chinese buyers. State-owned China Non-Ferrous Metal Mining (Group) Co. in May 2009 offered A$252 million for a 51.6 percent stake in Lynas Corp., which needed cash to resume development of the Mount Weld rare earth mine in Western Australia. Minutes of a meeting by the review board on Sept. 23, 2009, obtained by Bloomberg News through an Australia Freedom of Information Act request, show a concern the deal could undermine Australia as a reliable trading partner. "We have concluded that they would not be able to exclude the possibility that Lynas´ production could be controlled to the detriment of non-Chinese end users," the minutes show. That would have been "inconsistent with the government´s policy of maintaining Australia´s position as a reliable supplier to all our trading partners and hence potentially contrary to national interest."
6. Shipping Glut Punishes Gesco Bonds as Freight Revenue Drops: India Credit
Yields on the bonds of India´s biggest shipping companies are rising to records as the nation´s corporate borrowing costs surge and freight revenues slump because of a glut of vessels. The yield on bonds due December 2018 sold by Great Eastern Shipping Co., or Gesco, jumped 37 basis points this year to 9.37 percent on Feb. 7, the highest level since they were sold in 2009. Essar Shipping Ports & Logistics Ltd.´s June 2019 note reached a record 10.38 percent the same day. Leasing costs will drop 34 percent in 2011 as shipyards deliver 200 capesize ships, spanning about 35 miles end-to-end, according to a Jan. 10 Bloomberg News survey of eight fund managers and analysts. Shippers are being squeezed after borrowing costs for the highest-rated Indian companies climbed to a 23-month high of 9.25 percent as the central bank raised borrowing costs to contain inflation. The Baltic Dry Index of commodity-shipping costs tumbled 59 percent in the three months to Jan. 31, the most since 2008. While Gesco´s 2018 bond lost 1.1 percent this year, China Ocean Shipping Group Co.´s April 2015 notes gained 0.8 percent and the October 2017 debt of Russia´s OAO Sovcomflot rose 0.4 percent, Bloomberg data shows. "The issues are not positive for shipping bonds, and they are not much sought-after now," said Puneet Pal, a bond manager in Mumbai at UTI Asset Management Co., which oversees 653 billion rupees ($14.4 billion). "Yields should still go higher to justify buying them."
7. EU to Double Rescue Fund in 2013, Takes No Additional Measures on Portugal
European governments agreed to double the lending capacity of the rescue fund for debt-laden countries in 2013, while seeing no need for immediate steps to shield Portugal from the fiscal crisis. Finance ministers decided that the future emergency aid mechanism will be able to lend 500 billion euros ($675 billion), twice the size of the fund set up in the wake of Greece´s near- default last year. "The situation on the sovereign-debt markets remains worrying," Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a meeting of European finance ministers in Brussels yesterday. "The Portuguese authorities did take effective actions. If this action would reveal itself as not having been sufficient, other measures will have to be taken, but I have no indications that this has to be done in the short term." Bonds in Greece, Italy and Portugal fell as Germany opposed stepping up the rescue effort until European governments take fresh measures to bolster the competitiveness of the 17-nation economy. The maneuverings over longer-term economic policies pushed the near-term crisis management into the background.
8. Ambani's Flagship Reliance Communications Posts Profit Drop, Soaring Debt
Billionaire Anil Ambani´s Reliance Communications Ltd. reported a sixth straight drop in quarterly profit amid falling prices, undermining the company´s ability to reduce the biggest debt load in India´s phone industry. Third-quarter net income fell 57 percent from a year ago to 4.8 billion rupees ($106 million), the Mumbai-based company said yesterday. While that beat the 3.6 billion rupee average analysts´ estimate compiled by Bloomberg, sales and earnings before interest, tax, depreciation and amortization missed projections. The results may erode investor confidence in a company reeling from a one-day, 14 percent stock slide, a 71 percent surge in net debt, and a deepening government probe into the sale of mobile-phone licenses sold in 2008. Ambani´s group, which had blamed "baseless" speculation from unidentified rivals and brokers for last week´s stock rout, said Feb. 12 federal investigators questioned some of its officials. "It´s a pretty bad set of numbers, disastrous," said Naveen Kulkarni, a Mumbai-based analyst at MF Global Securities Pvt. "There´s a problem with execution with respect to what the top management thinks and what people on the ground are able to execute."
9. Australian Central Bank Says Consumer Restraint Is Easing Price Pressures
Australia´s central bank left interest rates unchanged this month as consumer restraint slows inflation and offsets stronger demand for the nation´s resources, minutes of its Feb. 1 policy meeting show. "The continuation of subdued growth in consumer spending and the lower-than-expected inflation outcomes provided additional time for the board to assess at future meetings the evolving balance of risks to both output and inflation," the minutes released today in Sydney said. The minutes reflect growing attention by Reserve Bank of Australia members to consumers who are holding back purchases and saving more after seven interest-rate increases from October 2009 to November last year. Households that the RBA characterized as "highly value-conscious" are easing price pressure fueled by a mining investment boom and a labor market near full employment. The RBA minutes said "the evident caution in household spending would, if it persisted, reduce the pressure on prices that might normally be expected in an economy with very strong terms of trade and limited spare capacity."
10.Exports to Lift Japan Economy from Consumer-Led Contraction: Chart of Day
Japan´s exports may pull the nation´s economy out of its contraction, as overseas sales surpassed domestic demand in relative contribution for the first time in five quarters, Cabinet Office data show. The CHART OF THE DAY tracks the proportion of growth from net exports and domestic demand, according to data compiled by Bloomberg from Cabinet Office figures. Overseas shipments minus imports were better for Japan´s gross domestic product than consumption for the first time since July-September in 2009, though both contracted from the year-earlier period as overall GDP shrunk 1.1 percent in the final three months of 2010. The lower panel shows quarterly growth in China, Japan´s largest export market. Private consumption is "dead," said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo. "Exports are probably going to be the only thing keeping Japan´s economy alive." Nissan Motor Co. and Honda Motor Co. are among exporters that have raised their profit forecasts on higher overseas demand, signaling companies have become more resilient to yen´s 8 percent gain against the dollar the past year. Exports may help Japan´s economy expand between an annualized 1 percent and 2 percent this quarter, Iizuka said.
11.London Banks Fold Their Union Jack as Brussels Seizes Financial Regulation
London, the financial capital of Europe, is coming to grips with a foreign concept: None of its three most important regulators speaks with a British accent. For the island nation that opted out of the euro, the start of three European Union oversight agencies on New Year´s Day has stirred anxiety about London´s future as a money center and how to influence the EU, which is overhauling rules from bonuses and bank capital levels to naked short-selling, high-frequency trading and over-the-counter derivatives. "The U.K. has to accept European regulation willingly in exchange for developing its position as Europe´s financial center," said Simon Gleeson, a financial regulatory lawyer at Clifford Chance LLP in London. "The U.K. needs to be on the inside if it is to remain Europe´s financial center." The EU regulators will set rules and guidelines for all of Europe, supervise their implementation and may intervene in nations during a crisis. National regulators won´t have freedom to interpret the agencies´ regulations. London bankers, who can appear "arrogant and patronizing" to EU officials, according to a report by ex-Barclays Plc adviser Malcolm Levitt, must learn to negotiate with European partners as equals if their finance industry is to prosper, lawmakers and bankers said.
12.Dougan Lowers Return-on-Equity Target as Goldman's Blankfein Clings to 20%
By cutting Credit Suisse Group AG´s profitability target last week, Brady Dougan acknowledged what some Wall Street bankers and investors are loathe to concede: Tougher capital rules will mean lower returns. Dougan, 51, chief executive officer of the Zurich-based company since 2007, lowered the goal for return on equity, a measure of profitability, to more than 15 percent from more than 18 percent. By contrast, Goldman Sachs Group Inc., the bank that makes the most revenue from trading, insists its target of a 20 percent return on tangible equity doesn´t need to be moved. Profitability soared in the middle of the last decade as banks increased leverage, using borrowed money to bulk up on assets. The credit crisis exposed the risks of that strategy and resulted in $1.48 trillion of writedowns and losses worldwide. To generate the same returns while holding more capital, Wall Street firms can either discover fresh profit opportunities or reduce costs, including pay, analysts said. "If the margins stay the same and the balance-sheet leverage drops, as we know it has, ROEs go down," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. "Your choice is pretty simple then: You cut compensation to your employees or you ask your clients to pay more. If that´s impossible, well then your targets are going to go down."
-0- Feb/15/2011 00:35 GMT